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

Okay. I think we're ready to roll. Thanks, everybody, for joining us. Thanks, especially to General Mills for being here. And this is Chairman and Chief Executive Officer, Jeff Harmening. Thanks again for being here.

Yes, great to be here.

Jeff and I are just going to have a chat for the next 35, 40 minutes. We'll try to cover off as many topics as I think are pertinent. I will say that General Mills is about 3 weeks away from reporting earnings so that they are in their quiet period. So we'll be a little bit restrained from talking about too much in the near term. Okay. So we have kind of a lot of ground to cover, I think. And before we get into some of the details, I guess, just maybe we'd just set some context. I think General Mills is coming off, not just one, but several very successful years and another successful quarter just reported. Saw broad top line growth, bottom line results that led to a full year guidance raise on not only sales, but operating profit and EPS. So a lot of momentum, a lot of progress against your Accelerate strategy. I guess, that's my view.

I share that. We're aligned.

How would you summarize current conditions keeping in mind, obviously, the constraints around quiet period? And just as you look out over the remainder of fiscal '23 into fiscal '24, what are the key priorities for the company?

Sure. That question alone, we could probably spend 35 or 40 minutes, but I won't filibuster, so I'll keep it top level and feel free to go into detail. I would say on the current environment, I would say, for our current categories, we're still growing double digits. And our growth rate measured in Nielsen for North America Retail in the fourth quarter was 11%, which is down from 14%, but the previous 6 months -- but still really good. We're competing effectively. As you noted, each of the last 4 years, we've grown market share in more than 60% of our categories, each of those years. And this year, it's about 70%, even in the fourth quarter, a little bit above 50%, accounting for cereal on a 2-year comparison. And so we feel very good about the environment in which we're operating and how we're competing. We see a little bit of slowdown in pricing in our categories, which is certainly understandable given the level of inflation has -- is starting to decline, at least starting to decline. And elasticities have remained relatively low. I mean we -- not to say there's no elasticity, but demand has held up well given how much pricing we needed to achieve given the cost environment when our costs are going up 14% to 15%, pricing has certainly been a big piece. But we're really pleased with the way that we've been competing. We're pleased with our M&A. Our M&A activity has certainly delivered. And as we look at the next year, I would say it's mostly a continuation. We'll continue to compete effectively. We will continue to look for opportunities for acquisitions and maybe divestitures, if we have the chance to do that. Portfolio shaping has been an important part of our strategy. We'll continue with our ESG priorities. I would say the only thing that will be -- the only thing that I see that's going to be different is not a strategic shift at all, but would be kind of regaining momentum on productivity, which we call holistic margin management. And over the last few years, we have been spending most of our time just trying to get product to market. And so our productivity efforts have lagged with what we would normally do. Usually, we're kind of industry-leading in productivity, and we look to get back to that, which I think is -- what should be a welcome byproduct of getting supply chains back to normal.

So picking up on that, just what is the status? Is supply now back to normal, so you could focus on that productivity in that HMM progress? Or are we still clawing our way back?

Well, we're -- I would say we're clawing our way back but we're most of the way there. Our service levels are currently in the 90s, including pet food. So we've made a tremendous recovery in pet food, but also on the rest of our portfolio as well. And what -- gaining -- I think maybe sometimes it's underappreciated what getting our supply chain back to those kind of levels, what it can do for our business. For starters, during the pandemic, we incurred a lot of cost because our supply chain wasn't operating as efficiently as it could. We couldn't get materials on time, then we have people at our plants that were employed kind of waiting around for products to arrive or we'd ship half loads of trucks. But with supply returning, that will allow us to drive more cost out of our systems. It was not even inflationary, just added cost in our system. It also allows us to focus on productivity efforts like holistic margin management. And then even some things you might not normally think about. But our salespeople spend a lot of time as logistics planners and with customers on supply. Now we can spend our time on in-store execution and everything that goes along with innovation -- driving innovation and distribution, the things that we would normally do. So getting back to this environment. EBITDA was not fully normalized, there's a lot -- is getting better really rapidly, and that will have a really positive impact on our business.

Okay. So I want to pick up on -- don't be shocked, I want to talk about pricing.

Yes, I am shocked.

You mentioned -- you used the words, pricing slowdown. Is that just the natural byproduct of lapping high pricing that was put into place last year? Or are you seeing sequential pricing rollbacks, givebacks kind of week-to-week, month-to-month?

So what we're seeing now is that, I mean, over the last 2 years, we've had 23% or so inflation and so pricing along with that. The slowdown in pricing that we see, I think, is a function of two things. It is a function of lapping significant pricing for last year. In fact, we increased our prices in March across most of our product lines. So it's not as if our price or list prices, if you will, have not increased. So we're not rolling those back. We wouldn't intend necessarily to roll those back, but we're lapping pricing from a year ago. The other thing that we're seeing, and we expected this and we expect to continue to see this is that when we think about promotional levels in our categories, the promotional levels of frequency have dropped probably 15% or 20% since before the pandemic, and prices are up 20% to 30%. As we see inflation start to diminish, what we'll see is that the frequency of promotion will increase. I'm not sure that we'll see the depth of promotion increase. But we'll see the frequency of promotion increase, which I think is a natural byproduct of an inflationary environment that's becoming more benign. And with that, because we can spend more time in store and with our customers, my guess is that the quality of our merchandising will also increase, because it's hard to go tell a retail customer that you want an end aisle display, for example, when you're having trouble servicing your business. They're just not going to -- there's not going to be that interested in it. But to the extent you can service your business, I would think that the quality of our merchandising will increase, which should impact the returns in a lot of the way.

Yes. I mean the concern is, I think, for a lot of investors is that, that escalates, right? As the -- if consumers exhibit more and more fatigue by inflation, and there's more -- the overall economic situation is more fragile. And if the supply is back for you, it's back for everybody. And if retailers are putting pressure, kind of listening to their consumers, you have this downward spiral. Somebody blinks, downward spiral in pricing and a lot of the profit upside that we're hoping to recoup gets competed away. How do you respond to that fear, that concern?

That sounds pretty bleak. I've heard that concern, but I really don't subscribe to it all the way. I mean probably not surprisingly. But -- and for a couple of pretty important reasons. The first is that we see -- I mean, competition in the categories was rational before the pandemic, it's been rational during the pandemic. I'm not sure why we'd see competition that would be irrational after a pandemic ceases. The second thing I would say is that inflation has decelerated, but it's not negative. I mean if we looked at this current fiscal year, which just ended for us, our inflation was 14% to 15%. We've already indicated it's going to be mid-single digit next year, and that's driven primarily by increases in labor cost, which I don't see slowing down anytime in the immediate future. If you just look at the jobs report from the U.S. in May, surprised quite a bit to the upside. So I think unemployment remains quite low, especially in the U.S. And so it's hard for me to see an environment where we see disinflation. Lower inflation is great, but it's hard for me to see an area where we have -- where we see disinflation. The other thing that cause for concern is that consumers are getting more anxious. And by the way, they are getting more anxious. But the first thing consumers do in the food business when they start to get more anxious as they trade consumption away from home to consumption at home. We saw that in the last Great Recession, we saw at the beginning of the pandemic, we're seeing that now. People trade out of restaurant eatings into at-home eatings because eating out in a restaurant is 3x more expensive than it is eating at home. And so what that does is it tends to raise the sales of core. That's one of the reasons why elasticities have been so benign. They're not 0, by the way. Another fear I hear from investors is that volumes will not improve even if inflation goes down, that's assuming that elasticities are 0. They're actually not 0. There actually is elasticity. It's just not as much as we would have seen historically. And so what we would assume is that inflation will continue to decrease as the next 12 months goes on. Pricing will not -- we'll see pricing, but it won't be as much 12 months from now as it is right now, but that volume should respond positively because elasticities aren't 0. And if consumers are nervous, which they are, they'll trade out -- they'll trade eating away from home to at home.

Got it. So as the environment -- consumers are nervous, environment is a little bit more difficult from that perspective as we go forward. We're cycling growth and some categories are going to be more susceptible to these pressures than others. Does that make and how much more does it make your Accelerate strategy and the choices of where to play and how to win more important? And what, if anything, do you kind of change in rank order as you look forward from a prioritization perspective?

Yes. So I touched on it a little bit earlier. I would say our Accelerate strategy -- I mean, strategy is a fancy word for prioritization. And so I mean, it's always important to prioritize. And whether that's the categories you're playing in, the geographies you're playing in, what ESG initiatives you pursue, I mean prioritization is critical. And it's going to be just as important in the coming 12 months as it has been in the last 12 months. And our strategy is working, and it will continue to work. And our priorities will continue to be focusing on the categories that we're currently in, doing a little bit of M&A, investing in our business. I mean one of the things that we know is that in times of volatility and even in tough economic times, the companies that invest in their business, whether it's consumer innovation or in investments in new product innovation or data and technology, the ones that can invest and do that effectively are the ones that get ahead. So we'll continue to do all of those things. The one thing I would say that we will do differentially given our supply chain situation, I mentioned this earlier, is get back in to increase our productivity. And we have a good line of sight to do that. We've been world-class in that for the last decade or more. And getting back to that should be a help to our margins.

Yes. And on that, I mean, as you say, investing in brand building and innovation, in capabilities like SRM, Strategic Revenue Management, revenue growth management, depending on what term you want to use, I mean, these are things that you've been investing in pretty consistently and pretty heavily over the last couple of years. As you -- if things are getting maybe a little bit tighter from a demand perspective that we just talked about, but on the other hand, you've got more HMM savings, hopefully, to play with, do you -- are you looking to accelerate investment, maintain investment? Or is investment likely to slow versus what you've been doing?

Yes. Well, to set -- it's a very fair question. To set the context, I mean, our consumer investment from, I don't know, fiscal '29 to fiscal '22 grew at kind of mid-single digits. And our fiscal '23, which we just ended a week ago, it will grow strong double digits. And we increased the investment we had in data and analytics quite significantly over that time, and we continue to deliver profitability and generate sales growth. So as we look ahead, we'll continue to invest in consumer spending. In general, I would say would be -- it would be in line with a projected sales growth. And we'll continue to invest in data and analytics, and we'll continue to prioritize those areas, even as we decide to not prioritize other areas. And so it is possible to continue to invest in things like consumer spending and data and analytics and improve your margins at the same time. Those things don't -- are not a one-for-one trade off. So to the extent that our productivity improves, yes, we hope to expand our margins, but we will continue also to invest in our capabilities.

Okay. I want to jump in -- just talk a little bit more about your individual businesses, but one more overarching question. Standing for good is, I know important to you and to General Mills. I guess maybe provide some context as to how that drives shareholder value in your mind?

Yes. So Standing for good is something we've been doing for a long, long time. In fact, we've had a public responsibility committee on our Board for more than 50 years and issued our first sustainability report more than 50 years ago. And so even though ESG has become kind of in vogue now, General Mills has been doing it as a company before it was kind of cool. And we don't do it because it's cool, we do it because the things that we work on with regard to sustainability can move our business forward and provide for a more resilient supply chain. So one of the things we have done, we have prioritized where our investments are. A few years ago, we had 70. Now we cut that down to 10 and there are 3 we really focus on. And by focusing on these 3, we feel as if we can make the biggest impact on the environment and to our business at the same time. And those 3 are really reducing greenhouse gas emissions, 30% by 2030 and 50% -- and all the way to net zero by 2050. The second would be regenerative agriculture. We're really proud of what we do with regenerative agriculture. And leading in that space helps -- when you have no-till kind of farming practices, what it allows you to do is sequester more carbon in the soil. But it also sequesters more water and nutrients in the soil which makes crops more resilient. And so by investing in regenerative agriculture, yes, we're reducing our carbon footprint but we're also guaranteeing the supply for future generations. And so it's not something that's just nice to do, it's something that's important to do not only for the environment, for our business. And then we're reducing plastic waste. And we have a goal to be -- have all of our packaging recyclable, reusable by 2030. We're 92% of the way there. So far, only 8% to go. It's a hard 8%, but 8% to go, but we're well on our path to doing that. So these are the 3 main areas where we're focusing on our sustainability efforts. And we believe that they're not only good for the planet, they're good for our business. But interestingly, consumers appreciate what we're doing in this area. And our brands have purpose, they have meaning, and our consumers respond to that, but so do our employees. When the consumers today or employees today, they want to know the company they're working for is standing for something more than just about making money. Yes, they want to know that the company is making money, but they want to know that it stands for something more than that. And what we have found is that our sustainability efforts in particular and our developing a culture of belonging at our company has really driven employee engagement and retention.

Okay. Okay. Let's talk about North American retail. It's -- the majority of sales is almost 75% or around about 75% of profits. And it's been, I mean solid. Growth has been very, very solid. You mentioned like the 11% quarter-to-date Nielsen run rate. So again, I'd call it solid. But as we look at it, the good news is the revenue growth is high. The downside is volumes are pressured because of the pricing. And market shares have been trending negative year-over-year over the last, call it, 12 weeks. So I guess, how do you balance all those -- first of all, if you agree with those -- that observation, and how do you think about that? And how do you celebrate the 11%, but also kind of look to improve both the volume trajectory and the market share trajectory?

Yes. Well, one of the things I'm most pleased with as an organization is we're not one to sit still for very long. And I think that's one of the reasons why we've been successful over the last few years among others. And even if we've done well, we're not going to be content with just how we have done. We're going to look to how we're going to do. And what I would say on competitiveness, yes, we're gaining market share in a little more than 50% of our categories and it was a little bit more than 70% before. But -- there are a couple of those categories where we're losing a little bit of share in Pillsbury dough right now, and we're growing at 11%. So I mean it's not exactly catastrophic. And in yogurt, we're losing a little -- we've lost a little bit of share but we're still growing double digits, the same with bars at 7%. And so even the places where we still have some more work to do in a couple of those categories in bars and yogurt, we still have more work to do, we're competing really effectively. And -- and I just think about our fruit snacks business where we've grown that 30% over the past year. And we keep adding capacity and we keep growing and we keep growing the capacity. In fact, we have more capacity coming online. I think of our Totino's business, which is our next $1 billion brand. And so now we have $9 billion brands, including Totino's, we've been constrained by capacity on Totino's and we're adding capacity there. Cereal is a #1 player in the category. And we love our cereal business. I mean we've been out-marketing our competition. We have been out-innovating our competition, and we feel great about the prospects with regard to cereal. And so, are our category is going to grow double digits forever? I don't think so. I mean I think they're going to grow in a more normal environment. Our whole enterprise will go 2% to 3% in a more normal environment, which we have not reached yet. But our goal will still be the same, which will be to make sure that we're competitive and as we're doing that, return money to shareholders.

Is there -- as you went through those businesses, I guess maybe first, kind of rank order or discuss for us which ones you see the most sort of growth runway in, number one? And number 2 is as the growth algorithm evolves, where do you see still more room for price-mix-driven growth versus categories that are going to be more dependent on volume recovery?

Yes. So as we think about our growth going forward over the next period of time, the growth will be led by our 5 global categories and 5 global businesses. And we chose those because they have growth potential and they're a good margin, and we have competitive advantages. And so without question, the growth as we look at the next couple of years is going to be led by our Blue Buffalo Pet Food business. We bought that business 5 years ago. It's been a gem of a business. We've doubled it in size. We've increased the distribution by 4x and we've done all that and we ran out of capacity this last year. And so the -- there's no question in my mind that Blue Buffalo will continue to lead the growth of General Mills as a category, but it won't be the only one. Häagen-Dazs ice cream is going to continue to grow. And we had tough year this year because we had a product recall that kind of stunted that growth, but we've got really good new product innovation on Häagen-Dazs, which has been really well accepted by retailers and now consumers, and we're starting to bounce back on that business. Our Old El Paso business has seen nice double-digit growth, and we have a great Old El Paso business in the U.S. but also here in Europe. In bars, while we haven't competed as effectively as we wanted to in bars, it's still growing nicely in the U.S. It's really rebounded well here in Europe, and we see a lot of runway of growth on bars. We need to innovate better on bars. We need to execute better, and we need to have more capacity on bars, which we now have. But on bars, we feel good about our ability to compete. And then there's cereal, and that will lead our growth as well. It won't grow as fast as those other 4 platforms. But if we gain a little bit of market share and grow and make a little bit more money in cereal every year, we'll like the outcome of that.

Okay. We'll talk about Blue Buffalo second -- in a second. But in terms of capacity on some of the other businesses you talked about having been constrained, are we caught up now? Or is there still more work to do whether it's on the Mexican food platform or snacks or what have you?

Well, there is still more work to do on capacity for a few lines. And so even as our on-time deliveries have gotten up into the 90s, that doesn't mean it's been 90 on every business and that doesn't mean that it can't get better. I mean I talked about fruit snacks a little bit. We added capacity a year ago, and now we're nearly out of capacity again. So we're going to add more capacity in our fruit snacks business. We're adding capacity on our Totino's Pizza Rolls business because that's been growing. We're adding capacity on our pet food business, which will come online in about a year from now. And so we're adding capacity on that. So -- but having said that, historically, we've grown our capital expenditure, it has been 3% to 4% of sales, they'll still be within that range, maybe on the high side of 3% to 4%. They've been on the 3% recently. But all in areas that -- in all these areas, it's interesting. We were growing them before the pandemic hit, we grew them during the pandemic. So our confidence we can grow them after a pandemic is pretty high.

Yes. The lead time for pack capacity is, as you say, looking out to next year. For those other businesses, how long does it take to put on snacks -- free snacks capacity or Totino's capacity?

It takes a long time. It takes longer than a CEO would want it to take, but it takes that long because we've got to buy equipment. And all the supply chain challenges we see in our business, our equipment manufacturers have seen the same thing. And so it varies when we get capacity online for these new things. For example, we're having a new plant being built for fruit snack capacity, that may take a year to get online. Blue Buffalo will be a year from now, Totino's will be sooner than that. So it really all depends, but the lead time really is driven by the capacity and the ability to get equipment from manufacturers.

The cereal business, as you say, it's been very strong. It's been strong through competitor challenges, but even as you've cycled that, it's remained strong. With Kellogg on the verge of splitting that business off from the snacking part of Kellogg, I guess, does it force you to rethink how the competitive landscape is going to shake out? How are you -- I'm sure you're watching and waiting like all of us. But how are you trying to get ahead of it and think through different scenarios as to what may come as that business becomes stand-alone?

Well, yes. I mean, look, we are paying full attention. I mean it's always helpful to pay attention to not only what you do, but also what your competitors are doing. In this case, I guess I would start by saying that the most important thing that we can do in cereal is continue to play our game. I mean it's been a winning game. And the worst thing we could do is get distracted by what other people are doing, even if we were paying attention to it. And by applying our game, I mean, our marketing is really good in cereal right now. It has been really good for a while. Our new products have led the category, including the launch of Minis cereals more recently, Reese's Puffs and Trix and Cinnamon Toast Crunch Minis, but soon to become Lucky Charms Minis and Cocoa Puffs Minis. And so that whole line has done really well. Our innovation pipeline in cereal looks really good. And so I really like what we're doing in the cereal business. So the first thing I would tell you is that no matter what our competitors are doing, the most important thing is that we stay on our game. With regard to competition, I mean, at least what I've seen so far regardless of which competitor it is, everyone has been playing rationally. I mean the -- certainly, as Kellogg splits, they'll have increased focus on their cereal business, but they had a lot of focus before, I mean, I think. And they've been a very rational competitor for a long, long time. I'm not sure why they wouldn't be rational going forward as is Post, is General Mills. And so -- it's not clear to me that competition in the cereal category is going to change really that much at all depending on what Kellogg's does. And in that sense, the most important thing for us to do is to stay on our game.

Okay. Let's talk about -- a little bit more about Pet. You had in 2Q, you had an inventory correction, a little bit -- a bit of a setback...

A little bit. Yes.

From a top line perspective, but it bounced back since quite nicely. Maybe differentiating between Blue Buffalo and the treats business, but just how you think about those businesses long term in terms of the growth potential. And then how you think they're positioned to weather a potential consumer slowdown.

Yes. So the -- in this past year, I mean, we're going to grow quite well on Blue Buffalo, but that's with significant supply constraints, which really came to a head in our second quarter of this year. Since then, as you look at the Nielsen data you pointed out, we've actually regained momentum on that business. Again, we thought we would regain momentum, so it's good to see. I think it's important to note that we thought we would regain momentum on our dry business first, and that has been the case. And we have fueled that growth with more investment behind brand building. We also thought then our treats business would bounce back, but it would take a little bit longer. It took a month or 2 longer than we thought, but our treats business is actually bouncing back quite nicely. You mentioned that acquisition, particularly the Tyson acquisition we made of that pet treats business, that has bounced back quite nicely. And then we said the one that was going to take the longest would be wet pet food and that has certainly been the longest, and it's going to be quite a bit longer. As we see going forward, what I would say is that we see really good growth out of our dry business now. I think we will, for the next period of time. We'll also see, I think, good growth out of our treats business. Even though treats is more elastic in terms of demand, so in times of recessionary periods, treats don't tend to do as well as do the kind of the main meal, if you will, because treats is more discretionary. We had so many services challenges this past year, how we see our treats business. I would think we'd continue to gain momentum. And the most challenging by far, is going to be our wet pet food business. And part of that is consumers are getting -- the parents themselves, not the pets, but the parents are getting back to the office more often. And so they're not topping up their dry food with wet as much as they are as they would before. And as consumers start to feel a little bit more pinched, wet pet food is more expensive. And I think that will -- that may struggle a little bit more. But we see a good runway of growth, especially in our dry business and especially in our treats business.

And the -- the profitability of that business. We've seen it go from the mid-20s from a segment margin perspective, more recently down to more like the mid-teens. What's the path forward for you on margin recovery?

Yes. Well, our goal would be to recover all the margin that we've lost. And the question is, okay, why has that margin dissipated? And there are a couple of key factors. The first is just the mix itself of the business. When we're selling less treats, which we did last year and less wet pet food, which is relatively more profitable than dry pet food, you'll see that our -- that has a negative impact on margins. And that will gradually improve over time. The second piece is that we outsource -- to get back into the dry pet food business, we had to go to external supply chain for a lot of our dry pet food. And that's a lot more expensive for us than doing it ourselves, because to do dry pet food, we do extrusion technology. We've been using that in cereal for a long, long time. We're really good at it. That will take another year for us to get out from under. And so what I would expect is that our pet food business should see a little bit of margin improving this coming year, but it will really start to -- but I think our sales growth may outpace our profitability growth in the near term. But once we get capacity for dry back on, I think -- and our treats business comes back to where we want it to be, those things will be accelerants to our margins.

So, progress from here, but probably a multiyear journey to...

It's going to -- it will be multiyear. These kind of things, we're really good at driving out costs, and they always take longer than you really want them to. And I think that will be the case here.

Okay. One business that we don't talk as much about, I think, is food service. But it's been a great driver of growth the last few years. Maybe just frame how you think about that business, how your approach to that business has changed as part of the Accelerate strategy, and how your outlook is positioned from here, especially kind of thinking through different macroeconomic scenarios.

Yes. So we have a -- I'm glad you -- actually, I'm glad you brought that up. We have a $2 billion food service business, and it has been a driver of growth for us for quite a while. And we think that it will be into the future as well. And it's a great growth business for us because we use a lot of our capabilities in retail for food service, but we also have our own food service sales organization and technical capabilities. And so our food service business, it's a couple of billion dollars in sales. And one of the things we've done recently that has actually helped that business is that we put our convenience store business into North America retail. We took it out of food service. But we also made our food service business in North America focused and not just the U.S. And that focus on specific categories, but also an increased geography has really helped the performance of that business. I think it's also helpful to note that for us, our food service business is largely branded products, and unlike maybe some others in this space, it's a little bit more resilient to downturns because a big piece of our business is in kindergarten through 12 grade schools and colleges and universities. So as long as our kids are in the classroom, that business tends to do well. During the first few months of the pandemic, it wasn't so good. But since then, it has tended to do really well. And we sell some -- we started do some in-store bakery, which is also going quite well and we do some restaurant business, which I think will probably be a little bit more challenged in the near term. But when you put all those 3 things together, our North America food service business has been growing, we're confident it will continue to grow. And the focus that we have in the business, including this new TNT pizza crust business has also been growing quite nicely as well. We acquired that about a year ago, and it's been growing, it's been growing very well.

Okay. About 7, 8 minutes left. Maybe a similar question on International. Because I think there too, your strategies evolved in terms of structure of that business, how you're focusing on the go-to-market model. Maybe a little bit frame for us that evolution, but then how you're seeing trends differentiate between what you're seeing here in Europe versus core markets, emerging markets like China, Brazil, India.

So as I think about our business outside of North America is roughly $3 billion in sales. And a couple of years ago, we realized we needed to do two things at the same time. We need to accelerate top line growth, and we needed to accelerate our profitability from kind of mid-single-digit segment operating profit into double digits. So those are the two things we had to do at the same time. The first step in that and kind of getting us back to accelerated growth in the top and bottom line was to divest our European yogurt business, because it was not accretive in sales growth, it was not accretive on margins. And it was taking time and we didn't really have a big right to win in yogurt here in Europe. And so that took a lot of time and energy away from the rest of our business. And so we divested that business. We divested the European dough business. And what that has allowed us to do a couple of things, it has allowed us first in Europe to focus more on the categories that are growing. And so the global category, I talked about earlier, Häagen-Dazs and bars and Old El Paso, those are our 3 biggest businesses in Europe. Now we've seen a nice return to growth in Europe. Even as Europe is tough, and we'll talk about the European economy, even that it's tough, we've seen an acceleration in growth. And I think it has to do with the fact we're not spending as much time on noncore businesses. And again, an example where prioritization is really helpful. The other unlock for us has been on yogurt and not having yogurt is, we took out a lot of stranded costs, but we also turned a lot of our markets into distributor markets. And we have core capabilities in places like China and Brazil, France, U.K., Australia, but outside of those, we're using distributors. And what that's allowed us to do is actually pick up our growth rate in those markets but also accelerate our profitability. And so this divestiture has really unlocked growth not only in the European geographies, but geographies outside of that. And we have room to go. So there's still more work to do. But I think now that we're past the Häagen-Dazs recall of this last year, I think you'll really start to see that business continue to improve on the top line and on the bottom line. As we take a tour around the world, you asked about economy. So the China economy has returned to growth, and that's been helpful for us. We own a lot of Häagen-Dazs stores in China. So when people are not on the go, that was not particularly helpful. So seen a return to growth on Häagen-Dazs there, consumer. But consumers in China are a little bit anxious about the future, just like they are in the U.S. Having said that, they're back out on the go. They're buying a lot of Häagen-Dazs ice cream. We have seen the shop traffic for Häagen-Dazs shops return about to pre-pandemic levels. But -- so the Chinese economy certainly has opened up. That's been a benefit, but Chinese consumers are still a little bit cautious. Brazil is kind of a tale of 2 kinds of different categories. We've seen a lot of inflation in Brazil, I mean, a lot of inflation in Brazil. And so the categories we compete that are value added for us, that means things like spices and snacks have done really well. Commodity categories, not as much. So Brazil has been a tough economy because of the inflation. We've seen mixed results depending on what categories we're in. And Europe, as I talked about before, elasticities in Europe are higher. Consumers are, I think, more pressured in Europe than they are in the U.S. We've seen energy prices go up and down. And unemployment is certainly higher in Europe. So Europe is a little bit tougher in operating environment. Having said that, our brands have held up very well in this environment. In fact, we've accelerated growth in Europe over the last couple of quarters.

Great. A couple of minutes left. Just reshaping the portfolio has been a really important component of your success looking backwards. Looking forwards, do you expect it to be as important? Or is most of the heavy lifting done and how much more portfolio reshaping opportunities there?

So as we think about portfolio shaping -- actually, let me start that conversation with our core business, because probably one of the things I'm most pleased with over the last few years is that we've been able to compete effectively on our core businesses, growing market share in the majority of those while we do this M&. A because -- and I only mentioned that because if we weren't doing that, no one would care about the M&A, because that's -- that's an interesting piece, but we have like $18 billion of the other staff. So growing the core and successfully executing M&A at the same time has been critical to our success. It will be critical going forward. We've gotten ourselves to a place where before we start doing portfolio shaping, before we became more competitive, we were growing 0% to 1%, and now we're looking at a 2% to 3% growth rate. That's not guidance for next year, that's kind of in a more normal environment. We would like to get to 3%. So as we think about the actions we still need to take, we'd like to do M&A that would add another 50 basis points of growth. We've done more than 100 so far, maybe about 100 basis points of growth accretion through all of our activities. We have about another 50 basis points to go. And that will be a combination of acquiring businesses that are growth accretive in categories where we currently are or adjacent to things we already do, so that we have a right to win. So things like pet food and snacking and those kind of things, food service, those are the kind of areas where we envision doing kind of acquisition work. And hopefully, in doing that, create -- generate growth, but also synergies at the same time because they're tangent to what we're doing or in categories we're currently in. But we'll also look to divest. We've had success in divesting businesses and businesses that are lower growth than what we currently -- than our portfolio or -- and businesses where it's not clear to us we have the same right to win or capabilities that maybe our competitors have had. And so that's what led us to divest yogurt here in Europe, for example. And so the combination of divestitures and acquisitions, we'd hope to get another 50 basis points of growth over time. And you didn't ask, but I'll answer -- I'll answer a question I asked anyway. For us, it's actually a pretty good environment for M&A right now for us. And that -- the fact that interest rates are going up, I mean, it takes out some of the nonstrategic competition. And we've got a really good balance sheet, and we've never lowered our standards on returns. And so for us, this environment is probably a better one than it was the prior environment only because we're not competing as much with private equity firms and others. And the key is that -- is the whole price realization, and can you find a business that you value the same that somebody wants to sell the values at and coming off a period of tremendous growth and to one that the growth will be good, maybe not as robust as it was the last year or two, that's still the work to be done.

Okay. So I said we'd cover a lot, we did. I think.

We did.

I guess I'll give you the last word. What do you think investors who listened to this whole conversation should walk away thinking about the opportunity at General Mills?

Yes. I guess I would end with we have a strategy, an Accelerate strategy, and that strategy is working. And so we're going to continue that strategy, the word, continue, is a lot. Within there, though, we'll change some tactics up. And whether that is what we look at for M&A and how we go about that, you heard me talk about that, but also productivity and getting our supply chain back in order. But it's mostly continuity of strategy with some tactics that may change given the environment we're about to end -- that we're about to enter. What I will also say is that things that made us successful in the last few years, certainly, people have eaten more food at home, and that's been helpful. But you don't grow share because of that, you grow share because you're more agile than your competition. It's been really -- been very, very difficult to predict the future over the last few years. I think the next 12 months, it's going to be difficult to predict the future. And so if you can't predict it, the best thing you can do is react faster than everybody else. And we have developed an organization that I wouldn't have said 4 or 5 years ago that we were agile, we are now an agile organization. And we have changed the way we operate to become more agile. And so I guess I leave investors with, yes, we're entering one period of volatility and entering the next, but we feel as if we can be as successful in the period to come.

That's great. And we're right out of time. That was perfect.

All right.

We spoke a lot about Häagen-Dazs, but thank you for supplying the conference with a lot Häagen-Dazs so to make sure everyone gets some. Thank you, Jeff. Thank you all for listening.

Thank you. All right. Thank you.