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

Good morning. I'm Tom Palmer, the food analyst at JPMorgan. With me today is the CEO of General Mills, Jeff Harmening. General Mills is a leading packaged food company in the U.S. It produces and markets a wide range of products, including General Mills cereal, Pillsbury doughs and Blue Buffalo pet food. Jeff has been with General Mills since 1994 and CEO since 2017. Jeff, thanks for joining us today.

Yes. Thanks for having me.

It's been a dynamic environment in the food space over the past few years, including over the past month or so. Maybe we could just start off with an update on trends and expectations as you see them for General Mills.

Yes. Thanks. I've been CEO for 8.5 years. I think it's been dynamic for the last 8.5 years or so. And as you say, the last month or so is no different. As I think about the current environment and reflect back a couple of years before the current environment, I think as I think about it, we started with kind of record levels of inflation and to the extent of more than 30% over 2 years. And with consumer wages not keeping up with that inflation and not only for food for a whole number of industries. And so I think that's the backdrop for what we're seeing today, which is consumers that have struggled over the past few years on a whole variety of fronts to keep their wage growth growing with prices. And so there's -- consumers are price sensitive now, especially for making less than $200,000 a year and especially if you don't have money in the stock market. If you're making more money and you have money in the stock market, which has been growing, that may be a different factor. But for everybody else, which is the vast majority, it's been a challenging economic environment. And we'll see if that gets better. Certainly, the shutdown of the federal government recently and everything with the SNAP program hasn't helped with that. But I think those are going to be relatively short-term effects relative to what we see macro. But importantly, what I would say is that as we saw the turn just about a year ago with -- in our business, we had some really good marketing on our Pillsbury business, but it wasn't working the way we thought it would. And so it really caused us to reevaluate our approach and going to market and what we needed to do. And so one of the things we decided on Pillsbury was that we needed to kind of get pricing back to within a certain zone, not that it would be equal to our competition, but just kind of within a range where consumers would consider Pillsbury again and let our marketing work. And so we made the decision to take some prices down on Pillsbury and Totino's as well, literally about a year ago. And we saw that start to work. And so we decided, hey, look, it's working on these businesses, maybe we ought to be a little bit more broad with this approach. And so we have been, over the last year, looking at our whole remarkable experience framework, what consumers value and getting our prices in line has been important. But the other thing we know is that, that's only part of the story. The rest of the story is making sure the rest of your marketing mix works. And so we've increased our level of new product innovation. We've increased the news we have our core brands. And as we sit here today relative to a year ago, in North America retail, we're growing our volume share in 8 out of our top 10 categories. A ninth category, we're 0.07 points away from share growth, but I'm not allowed to count that. So it's 8 out of 10. And so that's working as we anticipated, but that's only the first step to getting back to dollar share growth. And we're holding share in pet food. We're growing share in international, we're growing share in Foodservice. And so I would say we're certainly cautiously about optimistic, and we feel as if -- we're increasingly convicted, I would say, that the steps that we have taken are the right steps for us to take. We've executed them quite well. I'm quite pleased with the way that our team has executed. And yet our dollars are still down for the time being because we've made these investments in price. So the next step then over the coming few quarters, we will be seeing a narrowing of that price gap so that we can eventually get back to dollar growth.

Maybe sticking to some of the actions you've taken. If we go back a couple of years ago, it seems like private label was the bigger source of market share pressure broadly for larger brands. More recently, in certain categories, we've seen more share gains from maybe perceived better-for-you brands. And do you think the response needs to be different when you consider the potential pressure from kind of the -- I guess, the private label side tends to be maybe a more value-oriented response, better-for-you brands, perhaps a bit different of a decision-making process for consumers?

Yes, really insightful question. And it really depends on the category you're talking about and the brands you're talking about, and we compete in 26 different categories. But you're right in saying that we have felt pressure on the value side and private label is a part of that pressure because consumers are feeling stressed as well as some smaller brands. And you say health and wellness, I would say protein. I mean it's actually not -- it's protein. That's what consumers are wanting. And yes, that's part of health and wellness, but it really is protein. And so that's why we have a remarkable experience framework because what you do in cereal, for example, might be different than what you do in Pillsbury. And so I'll give you a couple of examples. So in cereal, what we realized is that we needed to have some protein offerings to compete with some of the people who are growing in the marketplace. And so we introduced Cheerios Protein, which is now a $100 million business and bigger than any of the small competitors. And we introduced some granola varieties, including granola varieties with protein. Now we're the #1 producer of granola in the cereal category. And so we did that. But at the same time, we realized that our advertising was not as good as it needed to be on Cinnamon Toast Crunch. And so we improved that advertising. And actually, that business has started growing. By the way, as has Lucky Charms. And so as we look at that category, that's what we need to do. Whereas in Pillsbury, our marketing was really good. Our new products were really good, but the price point wasn't where we needed. So those are two different categories where we have done slightly different things because what we needed to do to respond to consumer trends were different in those categories. That's one of the reasons why you'll hear us talk about a remarkable experience framework because it allows us to attack the right problems in the right place at the right time, and that will vary across different brands and different categories.

I think one way that you've noted product changes is on an ingredient basis. And we've seen -- and you showed a lot of this at your recent Investor Day. But in some areas such as artificial dyes, it's taking maybe the core of the portfolio and changing some ingredients. And then in other areas, such as adding protein content, it seems to be a bit more of introducing a new version of a product. How do you kind of make that decision of what needs to change at the core of the portfolio versus introducing new products that might have these attributes?

Yes. So as we think about how to grow, I mean, we think about the whole spectrum to innovating on our core to new products, to licensing products to making acquisitions. I mean we think about all those things, and there are different pathways depending upon our right to win in a category for the right to the brand to take ownership of certain benefits. And so we're willing to play all the keys of the piano, and we have over time. Obviously, we got into pet food with Blue Buffalo because didn't have any pet food. So we needed to buy our way into that category with a leading brand. You see us doing Cheerios Protein where we launched a whole new variety of Cheerios with the health benefit that people are looking for in protein. In other cases, we'll make Cinnamon Toast Crunch taste better and that's just on the Cinnamon Toast Crunch brand itself. And so -- and we recently just launched GHOST bars, which is into the high-protein bars category, which we think is going to be really well received. And so as we think about it, we really think about across the whole spectrum of how we innovate. We call it innovation with a big eye, how do you innovate? And again, it takes into account our right to win as well as what the brand can and cannot do. And we're open to all those different alternatives, and they work in different ways.

Maybe tying in with this, there is a bit of a question with some of the shifts we're seeing, right, secular...

I've heard that. I heard that question, yes.

Right? GLP-1, maybe some of the preferences towards protein and others, more scratch cooking, more price-sensitive consumers following such high inflation, especially, you've seen a lot over the years. I mean, I guess your view of what portions of this might be more cyclical in nature and which more enduring?

Yes, sure. The -- I mean there might be a little bit of a mix of each. I mean, as you think about fads and points of time versus trends, I mean that's how we think about these things. The humanization of pet food, for example, is a trend. I mean it's like a 20-year trend. Snacking is a trend. It's not a fad. Demographics are trends. I mean they're kind of knowable. It's just mostly just math. You see things like the economy and consumers feeling really pinched. That's clearly cyclical. I mean you go through periods where consumers feel more stretched and they go through periods where they're more robust and -- so that's -- I mean, honestly, that's clearly cyclical. I mean if it's not cyclical, then there's a whole different number of questions that one must ask oneself, but that's clearly cyclical. You get into something like GLP-1s, but I think is actually more interesting. What I would say is that the idea of weight loss has been around since the beginning of time. People wanted to lose weight since the beginning of time. GLP-1s is -- but however, GLP-1s is a completely new phenomenon within that and people -- consumers are reacting that in a way that's differential to what they have before. Will there be a structural change due to GLP-1s? Probably. But we've already seen some of that pass already. About 12% of adults are using GLP-1s. Now about 50% to 60% of those get off of GLP-1s within the first 6 months. So there's a rotation through that. It's pretty clear that GLP-1 usage will grow. And it may even -- it may double, and it may go by 2.5 points. And that will increase the need for protein. That will increase the need for fiber and macronutrients and different pack sizes and all of that sort of thing. But the question is, at the end of the day, how much does it impact growth? And it hasn't impacted food growth by multiple percentage points so far, probably fractions of a percentage point. So even if that doubles, okay, so you say it's a structural change, but maybe it's 1 point, maybe it's 1.5 points, okay? And that's not nothing, but it's not 5 points. It's not 3 points. And so I would suggest that GLP-1 usage will continue, but we will also adapt and we are adapting. And that's why we've been around for 160 years because we'll adapt. If we stood still and did nothing, that would probably be problematic. But we're not going to do that. And so I dare say that in some cases, people -- even if the impact that GLP-1s will have on society is not overblown, the impact it will have on us is it's overblown because assuming we don't react.

You noted high protein being maybe one of the key food trends we're seeing right now. Are there other health trends that you're watching or perhaps starting to see emerge?

Yes, and yes. So let me talk about protein for a second. Protein has been -- and it's a trend. People have been wanting more protein for like the last 10 to 15 years. But even that trend in itself is starting to -- has been changing, which is really interesting. It follows a path where you start with -- and we saw this kind of with organic where people -- there are people at the tip of the spear wanting protein. They'll eat more protein no matter how bad it tastes and no matter how much it costs. They just want more and they'll do anything to get it. And then over time, the more it gets into the mainstream, the more people go, hang on a minute. I want more protein, but I actually want it to taste good. And if it were affordable, that would be even better. And so we're starting to see that shift right now. And so you see that in like Cheerios Protein. It costs a lot less than some alternatives. It has 8 grams of protein versus 20, but people are okay with that. And it tastes a lot better than alternatives, it's a lot less expensive. And so one of the things that we think will happen -- we see happening with protein. We don't think we know what's happening with protein is that people would be increasingly unwilling to make trade-offs between how something tastes, the price and the efficacy. That's our sweet spot. I mean we made Fiber One taste good. I mean we can make anything taste good. And so we see that trend. But Americans get 1.5x more protein than they actually need. That doesn't mean they don't want more because people want more. And so you can't tell consumers they're wrong. You just keep giving them -- you make sure that they're getting what they want. 9 out of 10 Americans don't get enough fiber, 9 out of 10. And we know that with GLP-1 usage and as populations age, 55-plus in that category myself now, people need more fiber to make sure everything works its way through the system the way that it should. And so we're starting to see an increase in interest in fiber, and I think that will continue. People wanted to not taste bad. They wanted to do what it's supposed to do, but also macro nutrients. Again, if you're going to be consuming fewer calories, you still need the same number of macronutrients. And so we think that, that -- with those 2 trends will actually start to pick up as well.

Last one before moving on from North American retail. I wanted to ask on cereal. It has been a category that seems to be facing -- and this is a category level, I think, more so than General Mills specific, a bit more pressure on the volume side than maybe we're used to seeing. What's happening specifically in cereal that maybe is contributing to that? And it does seem like you're taking some action to address share trends. Is there something that can be done at a category level to help shore up some of these trends, too?

Yes. So as you say, we've done well on the share front and are doing pretty well now because we've taken some action. But let's back up a little bit to the category itself. We saw for a number -- for a few years, the household penetration of cereal was declining, which is never a positive indicator for the health of a category. We've actually seen that stabilize. So household penetration has stabilized, which actually is positive. And so -- but the category is still declining in terms of pounds by a little bit. And so that's all buy rate. And so then you ask yourself, okay, why would that be the case? And people are going -- they're finding alternatives to what they have in cereal. And a lot of those are like protein drinks, you're going to sense a trend here, protein drinks, yogurt with protein, other things with protein. And so in order to address that kind of challenge, then you need to introduce your own things like Cheerios Protein and granola, and granola protein, which we have done, which is why we're doing relatively well. So what we need to keep doing those things, but also recognizing that, I mean, Lucky Charms pounds are growing, and Cinnamon Toast Crunch is growing. And so -- and Reese's is growing. And so Reese's Puffs is growing. So there is -- there's also an opportunity for stuff that tastes good and making sure you keep marketing those and keep developing those brands even as you're going to the protein side, realizing not everybody wants all that. Sometimes people just want to test that tastes really good. And so making sure we keep marketing those well as well. That's going to be the key to our success. And look, I think even having a new competitor in the cereal category will probably help the category. Ferrero just bought WK Kellogg, and they're known for their innovation. And I think that will help the category to the extent that they invest in the growth of the category, which I suspect that they will.

Hope to spend a few minutes discussing fresh pet food. You recently rolled out Love Made Fresh, fresh pet food in retail. Could you maybe give us some update on the rollout itself, stores, SKUs available and how this might evolve as we look out over the next couple of quarters?

Yes. So we just launched Love Made Fresh, which is Blue Buffalo's entry into fresh pet food. We decided to go with our brand because Blue Buffalo has a right to win. Consumers are telling us they really love -- they love the idea of Blue Buffalo getting into fresh pet food. We did a test a couple of years ago. We found that out. We found out we could make good product, but it was going to be more daunting than we thought to generate awareness. And so having learned that lesson, we're kind of -- we're back in it now. It's not a hobby. It's not a test market. We're kind of all in and investing on the growth. And I would say so far, so good. It's too early to declare victory by like a lot. But so far, so good. And we've executed really well. I would start with -- you asked about like where is it? Refrigerators. We said we'd be in 5,000 stores in the first 3 months. We're about 6 weeks in. I just had a review with the team last week. And I can tell you specifically that we're in 4,531 stores already, which is slightly more than 90% of what we said we're going to do in 1.5 months, and we said it would take us 3 months. 1.5 months in, we're 90% of the way there. So I think that's actually quite good. The reviews online qualitatively are very good for our pet food offering. Pet parents really like it. Jeff Siemon, our Head of IR, is here and his dog Teddy, will not stop standing in front of the refrigerator looking for this. So we know that pet parents like it. We know their pets like it. We have 12 SKUs right now. Some are in a tube format, some are in a resealable tub and -- which is a new format to the segment, if you will. And so that's kind of where we are. We're executing well. We're getting good feedback from our retail customers. They're thrilled we're in this category. They think we can help build the category and grow it even faster. We think so, too. And kind of -- so that's kind of our -- kind of getting through this executional phase through the beginning of the year is our focus. After that, what I would also say is that we'll continue to grow the number of stores we're in. We have a line of sight to doing that. We have a lot of customers asking us to do that, retail customers. So that's good. We're bringing some more SKUs and in the first quarter of next calendar year in a standup resealable pouch, again, another format, and that's being well received by customers and consumers. And so -- and we've got an innovation pipeline, which we're really pleased with. And so again, we're going to have to invest for a couple of years. So far, so good. More coming this calendar year, we're going to look to continue to build momentum, but it's too early to declare victory. We're only like 6 weeks into this.

What about the economics of fresh pet food? I think one concern you noted when you did the trial, or one question maybe was whether there was a viable path to profitability. I think your message at the Investor Day last month was there is, and you do see it being more comparable to the pet segment margin over time. What's that path look like? Does that require internal manufacturing capabilities? Can you do it at current pricing levels? Or as it scales, would you look for driving margin through that? Just any update on that margin path?

Yes. So first, I'll confirm what you heard at Investor Day, which is right, which is we have a path to making this a profitable endeavor. I think our shareholders would ask us to do that. I mean selling product is one thing, but we're really paid to make money, selling it, so we can reinvest back in innovation and brand building and all the things that we do. We would not have gone into this again had we not had a path. So from the beginning, we told ourselves we're only going to get back into this if we feel as if we have a path to economics that make sense for us. And that's true of the income statement and also the balance sheet. But as I talk about the income statement first, it really is -- the key really is gaining scale. And a lot of good things come with scale, whether it's manufacturing or logistics or sourcing. And I'm not going to get into specifics only to say that there are a lot of good things that come with scale as well as some technology that we think that we can bring to the table, by which I mean I know that we can bring to the table. And so all those things on the income statement side have us feeling as if to the extent we generate awareness and trial and sales and scale that we can make a gross margin and income statement work for us. Then when it comes to the balance sheet, we're all -- because I get this question a lot, too, what about capital expenditures? I mean, there will be capital expenditures, but we're highly confident that we can keep capital expenditures within our current capital spending envelope, if you will, of 3% to 4%. And so we don't anticipate coming back and telling shareholders that we need to spend more capital than we had initially anticipated for the enterprise in order to get into this endeavor. So we feel good that the economics work there because if you have a great income statement, but it's eaten up by capital, that's not incredibly helpful in the long run. But to the extent you can have an income statement that works with capital that is manageable, you can have a business model that works. And then it's just a matter of do you have the right brand and the product and the branding, and we feel as if we do.

And another portion of the pet food portfolio. You're closing in on a year since the Whitebridge pet food acquisition, which most notably brought you the Tiki Cat brand. Its growth has been impressive. But similar to Blue several years ago, the brand has, I think, clear distribution opportunities underpenetrated as we look towards maybe more traditional retail channels. How do you view the brand's growth potential and distribution opportunity? And where do we stand in kind of integrating this business into the broader pet food portfolio?

Yes. So the Whitebridge acquisition, as you said, especially Tiki Cat, which is the crown jewel. I mean, it's been growing well. And it's been going well. We have a great team, but also Tiki Cat is a really good brand and the product is differential and something cats really like and the cat population is growing. So all good things. And so what I would say is relative to when we bought Blue Buffalo, there are similarities that are important that are also -- there's also a difference that's important. The similarities, as you noted, is that there's certainly room to grow in channels and distribution and all that kind of thing. And so we feel good about that. But the other differential growth is when we bought Blue Buffalo, there was actually quite a bit of awareness because Blue Buffalo had done a lot of branding over time, and they had actually gotten into the food, drug and mass channel before we acquired them. They were in 4 accounts already in food, drug and mass before we acquired them. Tiki Cat is in no food drug and mass accounts and their awareness, even though the brand is really good for the people who -- the consumers that know them, the brand awareness is a lot lower. So I would submit to you that the runway for growth on Tiki Cat is actually greater than it was for Blue Buffalo in percentage terms. Because just generating awareness, staying where we are and just generating awareness will generate growth and the cat population is growing pretty quickly. And then if you add on top of their over time, distribution growth, it's very clear to me that the opportunity in front of us on Tiki Cat on a percentage basis is actually higher than it was for Buffalo.

And maybe just an update on kind of integrating this business into the...

Integrating business...

You've got the Joplin facilities and...

Yes, so far, so good. I mean, again, we inherited a really good team, which is always helpful when making an acquisition. And we're largely through integrating our systems. And we had a couple of plants in Joplin that we got with the acquisition. We already have a manufacturing plant in Joplin. And so we're closing a couple of the ones we bought with Whitebridge, but a lot of those employees are transferring to the current -- it's almost across the street. And so we anticipated that we would probably do this when we made the acquisition. So it's good to have some synergies in addition to the growth, makes the models work out better. And we get to keep the vast majority of our employees employed as they go to our other facility in Joplin. So I would say on the integration, honestly, it could not have gone better so far.

We've touched on a couple of areas of the pet food portfolio, but ultimately, the biggest portion is Blue brand and it does seem like share trends have stabilized for dog food at this point. Maybe this is a bit more of an open-ended question than on the other two brands. But what excites you about the pet food portfolio when you look at Blue and the opportunity that still exists within that?

Yes. I am very excited about our growth potential in Blue. As you said, we have stabilized the business. That's not the ultimate goal. The ultimate goal is to get back to really strong growth, which we're confident we can do. And I think across Blue, we have more things working for us than working against us. If you look at Tastefuls, our cat brand, that is growing. The Life Protection Formula, we've gotten back to growth. And so we've got, obviously, fresh pet food, which we're very bullish about. Wilderness has been more of a challenge, but that's kind of our biggest challenge. The other thing is we've gotten our pricing right on treats, and we're seeing that rebound in terms of volume. And so now what it takes is going from having stabilized the core into growing the core, and that's kind of where we are. And I'm really bullish. We have a good pipeline of innovation. And we brought one of our big customers in just really recently here and you always think you do, but you test yourself whether you're in front of retail customers. If they feel the same way, then you're probably on the right track. I think they were, I would say, pleasantly surprised by the level of innovation we have on the way for our Blue Buffalo brand, and that gives us even more confidence. So I would say, yes, we've stabilized it for now, but that's not the goal. The goal is getting the core brand and all of our pet food back to strong growth, and we can see a path to do it. Now we need to do it.

On the -- I wanted to ask on the International segment. thinking through the growth opportunity, both from a sales and margin standpoint, it seems like you've addressed some of the challenges in ice cream with both innovation and rationalizing your store print -- your store footprint, sorry. As we look out, what becomes kind of the key growth drivers here? And I think the margin opportunity has been discussed for several years. When do we maybe see a broader inflection there?

Yes. So on our International, we've been on quite a journey over time. And we've said, look, the key to our growth is going to be growing our big global brands. And that is still the key. In the process, we have divested a number of smaller brands, La Salteña in Argentina, yogurt in China and in Brazil and in Europe, a dough business in Europe. And so we've kind of gotten rid of things that have been, frankly, a distraction and have been not helpful when it comes to margin. And so having said that, one of the things we've done is as you've seen over the last couple of quarters, and long may this continue, we've strung together a couple of quarters of really nice growth on the top line with outsized profit growth on the bottom line. And that's because we are really putting all of our focus back on our core brands. And there are 3 brands that will drive the majority of our growth in international. You're seeing that today. You mentioned Häagen-Dazs. And I'm really pleased what the team has done on Häagen-Dazs, introducing stick bars as a new format, but even more importantly, growing our core, whether that's in Europe or whether that's in China, in particular, growing our core alongside the stick bars and through product renovation and really good advertising. So again, using the remarkable experience framework in that brand, we've seen great growth on Nature Valley. I think it's up double digits so far year-to-date. And the Nature Valley bar outside the U.S., we started -- we kept -- we kind of got back to the basics on focusing on Nature Valley and the original bar, but also protein. Protein is big outside the U.S. as well. So Nature Valley is growing nicely. And the third pillar of that growth will be Old El Paso, which is also a high-margin brand, a good brand for us outside the U.S. So growing those 3 brands will account for the majority of our growth. We have seen some the last couple of quarters progress being made toward that and more progress to do, but I'm highly confident that we'll increase the profitability of International, and that will outstrip the sales growth that we see, which we think will also improve.

All right. And then on Foodservice, it's been more attractive sales and profit growth within the broader Mills portfolio. When you look out, maybe just an update on the key growth drivers. And secondarily, if we are heading into maybe a more challenging economic period, maybe discuss how exposed or perhaps insulated this business might be to those imaginations?

Yes. So imaginations, that's good. So the -- our Foodservice business, we have a really good -- as you know, we have a really good Foodservice business. It's got good margins. It's got good growth, and it's been sustained over time, and we compete effectively. It's because we're kind of structurally advantaged in a couple of really important ways. One is that we have good brands, which we sell through K-12 schools. So think about cereal or bars or that kind of thing. And we have really strong shares in that, and that's a growth sector. And actually, as the economy gets tougher, more kids tend to eat at school. So that is a growth business for us, and we've got really good shares, which is one of the reasons we have been growing. The second reason is we have a dedicated sales organization. And so we have a lot of dough business and flour business and that sort of thing, but we have our own sales organization, and we can really cover a lot of ground. And the third is that we have a lot of culinary expertise, which we showed off during our Investor Day, which you got a chance to see, particularly as it relates to all kinds of dough. If it's dough, we can -- we do it really well. And so because of those things and because of all those factors, we've seen consistent growth over time and good margins over time because we do have some structural advantages. A lot of times, when people think of Foodservice, they automatically go to a quick service restaurant. And for good reason, that's the biggest part of away-from-home eating. That is probably the smallest part of our away-from-home eating. The biggest part for us is in what they call noncommercial channels. So think K-12 schools and universities, and that part has been the growth part. And then we sell to a lot of smaller restaurants, and that business has been doing well for us.

I wanted to ask on cost controls. And it's really been impressive the level of HMM productivity savings we've seen over the past few years. For this year, you've announced $100 million in plant savings on top of that. And then -- and maybe this was part of the $100 million, but there was a recent restructuring announcement and a plant closure. How much more is there to go on the cost savings side relative to what we've seen so far?

Yes. So I mean, we pride ourselves on not only driving innovation, but being efficient with how we do it. And the more efficient we are, the more money we can put back into innovating and sales growth. And so as I think about -- you mentioned 3 things, and I'll put them in 3 different buckets in order of magnitude of importance over time. HMM, so productivity, HMM. The second would be this transformation and the third would be the manufacturing restructuring. By far, that is the order of importance. And you mentioned the $100 million we'll save in transformation. I'll get back to that. But just by order of magnitude, this year, we'll generate $500 million in HMM. And so -- and by the way, we've kept at a level of roughly 4%, now 5% over the last 15 years. That is the main engine of our productivity. It's well grooved. We have a line of sight into keeping our productivity efforts where it has been historically. It may not be 5%, it may be 4 out, but it will be industry-leading for the foreseeable future. And the more we look at it, the more we see opportunities. Now we're doing a lot of digitization and using artificial intelligence and that sort of thing to reduce waste, and we talked about that during our Investor Day. So HMM is by far the most important. When it comes to transformation, yes, we're going to save money, but I would tell you, we're just changing the way we do work. And we talk about the fact we're having machines do a lot more of our forecasting now than we did before, and that will save a little bit of money. But the big unlock is that helps our marketers focus on growth because it's hard to focus on, okay, what's the forecast for next month and try to generate new ideas for a brand. And so to the extent the machines do it, by the way, they're doing it as well as people. They're not nearly as biased. And our people are good, but we all bring our biases to the table. And so what we found is that we're taking our -- the time it takes for forecasting down by 75%. That leaves us more time to generate ideas to generate growth. And so as we look at our transformation, it really is using technologies and processes to make the work we do more efficient, yes, to save cost. I think even more importantly, particularly as it relates to marketing, is it will allow our marketers' time and energy to do what they need to do to generate growth. That's the real unlock is growth. And the plants -- sorry, I just got excited about that. The plants -- I mean, we closed 3 plants and all 3 of those plants came with acquisitions. And so there's not something broader at foot here really. It really is in Joplin, as I said, we saw an opportunity with Whitebridge to move capacity into our current facility. And then the acquisition we made in Foodservice, we will outsource some of that to a third party while keeping one of our manufacturing plants. And so it really was kind of a -- it's a tactic. It's a nice tactic. It will generate a little bit of savings, but it's not going to be nearly as much as the other things we talked about.

Historically, General Mills has been acquisitive, had some pretty successful acquisitions looking at Blue Buffalo and Whitebridge more recently. Maybe an update on current appetite for M&A and areas perhaps where you might see more opportunity from a category standpoint?

Yes. So I'll start the M&A discussion with there's nothing more important that we can do right now than generate organic growth. And that's where the M&A come -- by the way, it starts internally that way. So it's not just something I say to you. Anybody -- you -- any member of our leadership team, they would tell you the same thing without prompting or hesitation because no amount of M&A can make up for a lack of organic growth itself. And I know that's obvious, but sometimes we can tend to get ahead of ourselves. So that's -- it's also important as we look at M&A, we won't do any acquisitions or divestitures, which will prohibit us from growing organically. And so as we think about what we might do, it has to be with an eye toward making sure that we have not only the financial bandwidth, but also the organizational bandwidth to make an acquisition. So I don't need to come tell you and all of our investors that we can't grow organically because our attention has been diverted to acquisitions. So we really haven't changed our stance about how we view acquisitions. Over time, a number of studies have shown that companies that do both acquisitions and divestitures, both over time and kind of in a fair amount of sequencing do have a better total shareholder return. And that's certainly the way that we feel. And we've changed 30% of our portfolio. So far, we've made some big acquisitions, as you say, Blue Buffalo and Whitebridge and so forth. But we've also made some big divestitures, think about yogurt. And so as we look into the future, our stance toward M&A really hasn't changed. We have an always-on capability. We'll look for assets that are growthy in nature, things where we are competitively advantaged, where we think that we can create value. If it comes with some synergies, all the better. And -- but we'll also look for chances to divest. We think that somebody else might be a better shareholder than we are, and we can focus our attention the things that we are growing. And so again, it's probably a boring answer, but it's the same as we've thought about it for the past few years. Only you may hear more emphasis on organic growth because during the pandemic, we were basically selling as much as we can make and inflation, we're just kind of keeping our supply chain and pricing in line. And now we need to generate the growth ourselves. But our stance toward M&A and capital allocation in general has not changed because making money is important, but what you do with that money is as important. And we're really good at making -- we're really good with free cash flow conversion, like really good. And so we'll continue to pay our dividend and grow our dividend in line with earnings and do M&A. And if not, we'll give money back to shareholders in the form of share repurchases and pay down some debt in the process.

Great. Well, we're getting late in the quarter. And maybe just an update both on anything quarter-to-date related you want to provide. But also as we think about moving through the duration of this fiscal year, what do you see as kind of the key swing items that might send your reported results maybe to the high or low end of your current guidance ranges?

Yes. I mean the -- let me start with the year, and I can back into the near term a little bit, although there's only so much I can say about that. But on the -- as the year progresses, we said, look, we made a lot of price investments. We were lapping that in the first half of the year and that our profitability would be challenged in the first half, but it would get better in the second half as would our sales as we start to lap those price investments. That is exactly the way we -- I look at it and think about it exactly the same today as we did when we gave guidance at the very beginning of the year. And because we're seeing things play out roughly in line with how they would. Our pounds -- we're growing pound share in 8 of our top 10 categories in NAR, and we're maintaining or growing share in our other 3 segments. And so that's not to say there's not more work to do. Pound share is one thing. Dollar growth is another. So if you looked at our dollars in North America retail, you'd see those are down, but we think those will get better and the gap between pounds and sales will decrease over the course of the year, and that's still the way we feel with the biggest impact in the fourth quarter. But again, gradual improvement as we move throughout the year. That's what we saw at the beginning of the year and what we thought we'd do. That's still what we see, which is why we reiterated guidance at the end of the first quarter. As we look at the quarter-to-date, there's not much -- there's really not much commentary. You all can read Nielsen data as much as I can. And so you can see that North America retail has gotten a little bit better over the course of the last little while. We're holding share in pet food or International is holding share as well. And so there's not really much to report. In the short term, I get asked about SNAP and federal shutdowns and all that. I mean, look, your guess is as good as mine. Where I think -- what I would say about all that is there -- you may see a week or 2 of data because of SNAP being restricted, that's not as robust as it was before. But we believe -- and by the way, our retailers we talk to believe that the minute the funds are reinstated that, that will come growing back. And so there is certainly no long-term dislocation. There is no medium-term dislocation. I'm not positive there'll be a short-term dislocation. We'll see. The key is that because some spending has been restricted to make sure you have enough inventory with your retailers so that when the funding gets restored, that you're actually on the shelf and that you're there -- and we're in a great place to do that and have well alignment with our retailers. So that's probably as much in the short term that I can talk about.

Thanks for that. We have a couple of minutes. So if anyone in the room would like to ask if there's a mic right at the front. If not...

We stun them in silence.

Thanks for your time today, Jeff.

Yes. Thank you.

Appreciate it.

Yes, appreciate it.