Hormel Foods Corporation (HRL) Earnings Call Transcript & Summary

Well, good morning, everybody, and welcome to the 2023 Hormel Foods Investor Day. Great to be back in New York and hosting this 4 years and 2 days from the last time we were able to gather here and have an Investor Day. So really good to be back in person. And this is, by far, I can tell, the largest group that we've had here before. My name is David Dahlstrom. For those of you who don't know me, I'm the Director of Investor Relations at the company today. We have a fantastic lineup of speakers. And as I mentioned to most of you in the countless e-mails I sent to make sure that you had everything you need to get here today, come hungry. And so the breakfast, as you can see, that's just a start. And the bags that we put out there, that's just a start. So make sure you grab a bag and fill up. But we're going to have multiple snacking items put out here on the first break. We're going to showcase some of our foodservice items during our second break, and we're going to conclude the day with some local New York pizza from one of our great customers here in the city. So fantastic day. I hope you came hungry. Don't overeat right now. It's going to be a marathon. A couple of housekeeping items before we get started today. You'll find on your table a card with the WiFi information from the New York Stock Exchange. Everybody should be able to get on to the WiFi. Slides are posted. We'll be posting momentarily on our Investor Day site, investorday.hormelfoods.com. You can also access them on our company's Investor Relations website. And if you have any questions throughout the day, make sure you find me, I'll be sitting up front here. And then Steve Borgerding is probably roaming around right now, but he can certainly help with any questions you have today. We also have a team of about 30 people here today. This takes a village to put on. It's truly a team effort. So thank you to the 30 individuals here today from Hormel as well as our 20,000 inspired employees around the world. Full agenda. So we'll get started here in just a minute with Jim's opening remarks. So Jim and Jacinth will speak first today. They're going to go about 50 minutes, and then we'll break for Q&A. So Q&A with Jim and Jacinth. We'll take that break and have some of our great snacking items. The second part of the presentation will be all about One Retail. So our retail organization, which has now come together underneath our Go Forward structure. Deanna will be speaking. Scott will be speaking and then we'll do another Q&A session really focused on retail. And then the final presentation will be foodservice and some detail on One Supply Chain. And right before we get to that, again, we'll try those great foodservice items, we'll end with some great pizza. Last thing before we get started today, is, as you'd expect, we'll be sharing some forward-looking information today, and results may differ materially from those that we implied today. You can see a detailed list of our risks in our 10-K and our recently filed 10-Q, which is available at hormelfoods.com under the Investors section. Invest, transform, grow, that is what today is all about. And with that, it's my pleasure to introduce Jim Snee, Chairman of the Board, President and Chief Executive Officer of Hormel Foods.

Well, good morning, everyone. Thanks for taking the time to be here with us this morning. We know it's a commitment. But I think we're going to make it worth your while. David made the opening comment about the food and we heard your feedback. So for those of you who are with us here in 2019, some of the feedback we got was your food company, focus on the food. Let's see more food. We took that to heart, and we've already started this morning. And so to David's point, you will not leave here hungry because we are a food company. The second thing before we jump into the presentation is that all of you know that we've been very open and very candid about how challenging 2023 has been for us as an organization, been some things that we imposed on ourselves. There's been some headwinds in the business. But more than anything, just know that we're wrapping up our year here in a couple of weeks, and that we'll be providing more clarity on the full year -- the quarter and the full year in our fourth quarter earnings call. And the reason I say that is because we want today to be all about the future, the future and the opportunities in front of us, because these opportunities are real, and you're going to hear that from the team today. And as you sit here and listen and think and process and even after you leave here today, there are several key messages that we want you to leave here with. The first is that we have made significant progress as an organization. We're stronger, we're more balanced, we're less volatile. The second thing is that you'll be hearing some updated priorities from us, really focused on retail and supply chain and that we have made investments in our business. And when we think about -- sorry, we're here. So when we think about how we are investing, transforming and growing, there are several things to know. The first is that we do consider ourselves an uncommon global branded food company. That's really who we are. And we'll spend a little time walking through who we are. The second part is we want to update you on what we've been doing. We haven't been standing still, right? All the things that we have been doing to make us that stronger, more balanced and less volatile company, and then what I want to do is leave you with the path, the path for our 3-year plan to grow earnings. And it's a path that will come from growing existing business that will extract value from transformation and modernization, but then also thinking about how we will continue to capture value across the businesses that we have. So let's start, for those of you who aren't as familiar with who we are. We're a 132-year-old company that is just over $12 billion in sales and were fueled by incredibly strong brands, over 40 brands that hold #1 or #2 share positions in the categories in which they compete. And the performance of that business has allowed us to pay dividends for 57 consecutive years, a dividend aristocrat, if you will. And we're now in a position where we have aligned our business structure with the strategy of our business going forward. And when we call ourselves an uncommon global branded food company, it's important to think what that structure looks like today. And so we have a retail business that has incredibly strong brands that are relevant with today's consumer. But we are a bit uncommon in that we have such a strong foodservice business. And the foodservice business is almost 1/3 of our business, and it operates from a very advantaged position. And you'll hear more about that from Mark Ourada later in the day. And I do want to be clear that we are operating and building from a position of strength, whether it's the brands, whether it's the balance that we talk about so often in our business, the structure that we've now put in place, the experience of our team that you'll see and hear from today, right? The solidness, the stability of this organization and then all with a penchant for making sure that we're doing the right thing because we know that we can make a difference. And we're also a company whose strategic focus is crystal clear. The strategic focus is crystal clear. We have made and we will continue to make investments in our business, investments in our people, our processes, the technologies, never losing sight of the fact that we have to make investments in our brands as well. The continued transformation of this business, knowing that we have to modernize processes. We have to modernize our portfolio, all so that we can continue to create value as an organization and ultimately grow this business, grow net sales, grow net earnings and as I said a little while ago, grow the impact that we can have by doing the right thing. And you're going to hear more about the strategic focus and our ability to execute on that from this talented team of leaders, okay? This is the team that is executing against the strategic focus, talented and experienced. You'll see and hear that today. And then we're also a company that wants to make sure that we do the right things and that we have a positive impact where we can. And we have demonstrated that we're doing just that. The work that we're doing to positively impact the environment, the work that we're doing to help with hunger and food and security initiatives, the work that we're doing to elevate our team members and others through our education initiatives. We're doing a lot to have an impact. And I want to share with you a video that talks even a little bit more about what we're doing. [Presentation]

And so we don't do this for the recognition. We do it to have a positive impact. But we're certainly proud of the recognition that we have received from some of the most reputable organizations in the world. And so again, a testament to the great work being done by our company and by our team. So now let's talk about what we have been doing to make our company stronger, more balanced and less volatile, what we've been doing to really execute against our business. And it's this vision of becoming an even more balanced and stronger global branded food company. So when we think about our high watermark for operating income in 2016, since that time, there have been a number of different macro issues facing the company. We've had the decline of our Jennie-O Turkey Store earnings. We've all been through COVID, the pandemic. But I think what this chart really demonstrates is the resilience, the resilience of our business and our ability to get back to, in 2022, right, that high watermark. Now as I mentioned, 2023 has been a challenging year. But I think the point here is that we have a business, we have a portfolio that is resilient. We also have the right long-term focus on our business. And to make sure that we continue to focus on building this stronger, more balanced, less volatile business, there really have been 3 strategic initiatives that we've been working against. How do we in-store the portfolio to become more profitable? How do we continue to modernize our capabilities, facilities and systems? And then always thinking about the right organization, structure and initiatives to support it. So let's take a deeper dive into each of those points. When we think about how do you improve the portfolio to restore profitability, well, we've been on this value-added march or this value-added journey for a really, really long time. And for those of you who have been with us on that journey, you've heard us talk about how we've incrementally increased the amount of value-added products or sales in our portfolio. And today, it stands at about 90% of our sales. That's an impressive number. And this isn't just going from pure commodity to a value-added product. This is increasing the value of an already value-added product. And our team does an amazing job in that regard. And then the other part I would highlight is how we've really focused on trying to create more balance in the key inputs. So it's not just a pork and turkey business. When you think about the percentage of inputs now tied to nonmeat inputs, this is a significant shift that we've seen over time. And then we've also made a number of dilutive volatile divestitures. And then we've countered that with a number of stable, more accretive businesses. And the numbers, the swap, if you will, of divesting over $1 billion in sales with operating margins less than 10% and replacing it with sales of almost $2 billion with operating margins greater than 10%, right, meaningful impact on our business. And then when we think about how do we modernize our business, modernize our capabilities in our facilities. Well, the first is a capability and the work that we've done to put in place our digital experience group. And we did that at the right time as e-commerce was on the horizon, but then it came over the horizon in a hurry during COVID. And so we were positioned well to take advantage of that. And our sales now, we have over 10% of our sales coming from e-commerce. And then the other part was really a step-up in our revenue growth management capabilities. It's not a skill that was brand new to us, but it is a scale that we were able to modernize and enhance. And then we've also made significant investments in our facilities. And this is an important part to think about because we've essentially doubled our CapEx spending from the period of 2012, 2016 to 2017 to 2022. Now yes, some of it's scale, size, the acquisitions that we've added, but a lot of it is making sure that we have the capacity, the value-added capacity, to grow the business the way that we want to. A lot of it is also cost savings, extracting costs from our system, and then also focusing on automation. As labor becomes more and more difficult to acquire over time, making sure that we're doing everything we can to automate our processes. And so, really good efforts in terms of how we think about our ability to modernize our processes and facilities and systems. Then our third action really is how do we organize this business. How do we organize it to make sure that it's set up properly for a long-term sustainable growth? And most recently, we did that with our integration of our Jennie-O Turkey Store business. We announced that project, and that is something that's been in process making sure that we could bring in Jennie-O Turkey Store and create a more demand-oriented portfolio. With that, we expect to capture value of $20 million to $30 million. And that project continues to be in process. And then the other thing that we've done is we've been able to rightsize our pork supply chain. Through a number of different strategic actions, we've been able to reduce volatility, guarantee supply and redirect about $150 million of capital to other strategic priorities. And then -- and, of course, in 2023, we announced our Go Forward initiative, the biggest restructure we probably had in our company's history. But it's a structure that was necessary to make sure that we had our strategies and our structure aligned, making sure that we could capitalize on all of our strategic priorities. And so a lot of work that's been done in this organization, but all of it very thoughtful, very intentional, very strategic, leading us to our 3-year plan to be able to deliver strong earnings' growth. And it's going to come from 3 areas. We need to be able to continue to grow our business, we need to be able to extract value from this transformation and modernization, and then continuing the strategic value capture that we've always been able to do. And so as we dig into this area, it's fair to say that we see ourselves as entering this next era of growth. As our -- when we think about our past, there's a time when we were meat-centric, focus more on a commodity business. And then we've seen the evolution in our business, in our portfolio. As we've talked to so many about -- as we've talked to so many of you over time about how we want to increase our value-added portfolio, how we want to become more balanced, how we want to be less volatile and we've done a lot of that work. And so now as we think about our future, what is this next era of growth for our company, what does it look like? And it really is about accelerating the growth of our organization through this transformation. And we believe that we can generate over $250 million in operating income growth by the end of fiscal 2026. And so we see the path to get there. We see the path to get there. We have our goal, we have our objectives, we have our priorities, we have platforms, enablers, and we're going to take a second and walk through all of them because it all starts with our culture. It starts with our uncommon culture of corporate and personal accountability, a formula for success that we've had for years. Knowing that we have to build brands, we have to innovate, we have to make accretive acquisitions and maintain the balance across the portfolio. And a culture that we live and breathe every day, a culture of accountability, making sure that we're holding each other accountable. And then making sure that we're competing in the right platforms, right categories with the right brands. And we believe we've set ourselves up to do that, right? Platforms where we have earned the right to compete and to win. These aren't new categories or new platforms, things that we've been doing for a long time and doing them successfully. So the right culture, the right platforms, the right priorities. And so again, we've updated our strategic priorities, not overhaul, not revolutionized. We've updated our strategic priorities to make sure that these priorities align with where our business is today. So our last set of strategic priorities talked about our retail business like this. We need to protect and grow our core brands. Today, we're saying, no, we need to drive focus and growth in our retail business. This retail enterprise is a significant engine for this organization. Expanding leadership in foodservice is not anything new, something we've been doing for a really long time. And then the third thing for our segment priorities is our desire to aggressively develop our global presence. And while we don't have our international team presenting here today, we do have a brief video that gives you an update on some of the great work that they're doing. [Presentation]

So we've made some great investments in our International business. Swen mentioned the most recent one in Garuda Foods. And so we believe, again, that we've got the right investments and the right structure in our International business to be able to develop that in a more aggressive way. And so those are the segment strategies. Next thing is we want to think about, what are the strategies across the entire enterprise? And so we've talked a lot about entertaining and snacking. And entertaining and snacking covers all parts of our business and making sure that we're executing against that because we've made significant investments there as well, making sure that we have future-fit our One Supply Chain. And you'll hear more from Mark Coffey at the end of the day, but there is work to be done in our supply chain. But there's also a willingness and a plan to make sure we're making those investments to extract that value as well. And then a strategy that's not new is our desire to continue to transform and modernize our company, never ever, ever losing sight of that. So the right culture, the right platforms, the right priorities. Now we've got to make sure that we've got the right objectives to be able to deliver on this $250 -- over $250 million in operating income growth by 2026. I want to spend a little bit of time here because the way we've set up this slide is rather intentional, that there's a sense or a level of dependence as we think about these objectives but, at the same time, they're also very independent, meaning that we will be executing against each one of them independently. The first one being that we have to restore sustainable and dependable bottom-line growth from our current business. And we know that we can do that across the entire organization. And what gives us that confidence? Well, I've talked several times already about the number of relevant, reputable brands that we have, and a lot of them have emerged stronger post-pandemic. The work that we're able to get back to on the innovation front, that's really, really important, and we're seeing a rejuvenated innovation pipeline. We've talked about the capacity that we've invested in. So we're set up to take on this new value-added growth and still maintaining a focus on a more balanced, less volatile portfolio. And so we know how to grow the business, and we're set up to do that. The next part is our ability to drive savings by minimizing complexity and reducing costs. Again, Mark Coffey will be here to get you into some more of the details in how we're specifically going to do that. But what gives us the confidence that we're going to be able to do it is that we have identified those savings opportunities in all facets of how we operate our business, whether it's the way we plan, the way we buy, the way we make or the way we move it. We have realistic and achievable goals in all of those areas. And this isn't just an inside view. We have partnered and got an external view with Accenture. And they've done a great job, and they have the expertise to support this initiative. And then the third thing is, we are going to be able to execute against this because we are seeing a normalization of our industry-wide supply chain. It's not perfect, but it's a heck of a lot better than it's been. And so we'll be spending less time on having to just react in our supply chain and more time on being strategic in our supply chain and across the entire business. And then this third part is our ability to capture strategic value. Again, this isn't new to us but it is something that we need to be able to execute and deliver against. And again, there are specific opportunities for us to be able to do this. We've still got value to capture on the synergy front from Planters, the integration of our Jennie-O Turkey Store business. There are benefits that are yet to be realized from our Go Forward initiative, the restructuring of our retail business, the continuous improvement programs across our supply chain. And so these opportunities, again, nothing new to us, but they're identified, they're realistic and they're achievable. So we have this path. And when we bring growing the business, transforming and modernizing this supply chain across the enterprise and continuing our strategic value capture, this is our opportunity. This is our future to be able to do what we say we're going to do. And so what does that mean for us? Well, it means that we will be able to return this business to its historical earnings' trajectory, and that's important because we need to get back on that track. The second thing is we need and want the fuel for incremental investment in branded value-added growth. I mean, our advertising budgets, our investments in our brands haven't suffered. They've continued to increase. This is the incremental piece above and beyond where we can really drive our business. And then, of course, the increased cash flow just supports so many other things that we want to do for dividends, capital and of course, we have some debt pay-down. But the impact of achieving this plan is real. And you'll hear more from the rest of the day on how we're going to do that with more specificity in each of the areas. So in summary, we are a stronger company today because of the strategic actions that we have taken since 2016, not accidental actions, thoughtful strategic actions that we've taken. We do expect this 3-year plan, this 3-year vision, to deliver meaningful earnings' improvement to our organization and most importantly, return us to our historical earnings' trajectory. And we do this because we have the right strategy, the right people and the right culture to make this happen. So I'll be around throughout the day. As David mentioned, I'll be participating in all the Q&A sections for continued conversation. But at this point, it is my pleasure to introduce our Chief Financial Officer, Jacinth Smiley.

Hello, and good morning, everybody. I am super excited to be here for my first Investor Day as part of this wonderful company and to share this platform with such an incredibly talented leadership team and to share the journey that we're on to truly transform and grow this company. So Jim talked about the $250 million plus that we're going to drive in operating income over the next 3 years. I will hone in on the largest portion of that, which is $200 million or more from transforming and modernizing. We think about these in 4 buckets, and that's how we're focusing the work that we're going to do over the next 3 years. First and foremost, in our mind and in my mind, as I've gone through and led multiple transformations and been part of multiple transformations is what's critical to form the pillar that a successful transformation is built on is around our people and processes. Hormel Foods has been the hallmark of ensuring that people comes first. People and processes are the fabric of what forms this company. And if you think about where we were through the pandemic, if we didn't know it then, we knew it after we came through the pandemic and saw how our people showed up and knew that they were really the backbone of this company. So our HR team has done an amazing job thinking through what's that employee proposition and what are the skill sets we need to upscale our talent to truly compete in this environment, but also to enable and support the growth of where this company is going and where we are today needing to modernize. The other component is around processes. Because if you have great people and want them to do good work, they can't do that if the processes aren't what they need to work with. And Jim talked about the evolution the company has gone through. And what I can tell you is that our processes have not kept up with that evolution. And so that's the work we're undertaking to ensure that we're streamlined, automated where necessary to ensure our team is doing value-added work but so that we can also foster an environment that they feel good about the work they're doing everyday and contributing to grow the company. The second area of focus is around data and technology. We started this journey pre-COVID when we started with Project Orion, and Jim touched on that a bit. And we have done the work on the finance side of the house, the HR side of the house, and the intent was supply chain. We paused it for good reasons as we integrated Planters and also integrated Jennie-O into the business. And now, we are continuing that journey to modernize our supply chain, build the underlying infrastructure for technologies to support the company but also accelerate and enhance our capabilities around data and analytics so that we can make data-driven decisions in a faster manner with the right insights, externally and internally for the business. The third area is around supply chain efficiency, and Mark will spend a lot more time going through here. But it's around thinking through from an end-to-end standpoint, you think about demand planning all the way to getting it to the customer, how can we become more efficient? And how do we take waste out of the process inside our plants streamlining that? I mean, this company has had a history of continuous improvement, and that's a culture that we live every day. I mean the team is there on the floor, always thinking through how do we get better yields, how do we automate, how do we recognize where there's bottleneck throughout the process. However, again, with the evolution, with our culture of really thinking about doing everything we can for the customer, there has been waste that's entered into the supply chain. And so we're going to do the work to get that out, not just for us to be able to expand margin, that's great, but it also makes us a better supplier to our customers and to our consumers and really truly enhance value. The last area is around portfolio optimization. We have a very complex portfolio. You can see a lot of those, right, sitting here on your tables and outside in terms of the level of products that we offer. And again, our culture of really wanting to be uncommon and focusing on delivering what the customer wants and what the consumer wants, it has really morphed into a really complex portfolio, different pack sizes or in different channels. And so it has also created complexity for the supply chain. So we're going to spend time segmenting the portfolio, understanding how we drive strategic value, having targets and investing in the SKUs that we believe we need to focus on to really get it to the profitability as we expect it to. And then also weeding out the ones that don't, that we have spent the time understanding that, that's not driving the right value. And ultimately, what that will do, it will get us to a rightsized portfolio that drives the margins that we expect and ultimately, overall enhance the growth and value of the brands. So we will go into just listening to what our teammates that are closest to this really think about where we are and so you can hear that from them in this video. [Presentation]

Can you hear me? So hopefully, you heard the pride and passion there from our teammates about their belief and commitment to the work that's absolutely necessary for us to undertake here. And we will drive more than that $200 million of benefit from focusing on those areas and get us back to achieving our long-term algorithm of -- did I skip a slide? Get us back to our long-term algorithm. And as we think about what does that look like in the near term here, it's -- with our 2 to 3 or 5 to 7 and 15, back to the foundations of which this company is built on, which is innovation. And that's not something we talk about a lot but it's certainly a focus for the company and continues to be so. And what does that look like in the near term here? As we think about '24, '24 is going to be a year of significant investment as we think about what's necessary to enable the transformation and modernization work that we're undertaking. '25 is when we will start to see some of those initiatives being completed and starting to see the value fall through to the bottom line and then accelerating into '26 and beyond. And we talk about '26 as being a point in time for this, but I mean the intention and expectation is that we'll have continued growth into the future beyond '26. So I'll close by saying this is incredibly exciting to really be part of this journey with this company. And we continue to be focused in areas of managing the portfolio and capital allocation is one of those questions that I get asked very often by a lot of you. Jacinth, you started with the company, what's your approach in capital allocation? And what have I said? Nothing strange. The approach the company has taken historically has served it well. I believe it's the right one. I am very much aligned. We are focused in these areas, first required then strategic, then opportunistic with a big focus, of course, on the dividends. That's a priority for the company, and it continues to be, and I endorse that. Jim talked about us being our 57th consecutive year of dividend increases and the fact that we're a proud dividend aristocrat. I like to use the bigger number. We paid our 380th dividend last quarter, 380. And so that's a trend we want to continue in addition to ensuring that we have a very strong balance sheet. We maintain a very strong discipline around how we manage our financials, part of what drew me to this company, quite frankly. As a CFO, you want to know that you're with a company that's very disciplined about their financials and I feel we're in a very enviable position here to a lot of our peer set. You look at where we sit relative to our EBITDA from a debt perspective, this gives us optionality to do things as we think about the steady cash flow that we continue to generate and then again, on top of it, ensuring that we're very disciplined about capital allocation. So I am super excited to just continue on this journey with the company knowing that the company is very resilient, part of the reason I came here. Seeing for over 130 years plus this company has been able to navigate all the cycles, continuing to stay relevant to the market, to consumers, but also ensuring that they're thinking through what's ahead and how do we see around corners. And so to be part of that journey and knowing that I will have a hand in our path to the next chapter of this company is really, really exciting. So with that, I'll turn it over to David.

So we have about 15 to 20 minutes for Q&A right now. We have 3 microphones around the room, and I know it's not ideal, but we do want to make sure that everybody speaks in the microphone as everything is being webcasted today. So find a microphone, then we'll go. Michael, we're going to start with you.

Michael Lavery from Piper Sandler. Just wanted to walk through the math a little bit for the next 3 years and make sure I know how to put the pieces together. You called out the $200 million transformational savings and the $25 million strategic synergy and investment savings. That obviously, gets you very close to the $250 million already. How do we think about either the cadence? Is the 5% to 7% just coming towards the end and putting in that last little bit, does it overlap? Like can you just maybe walk through a little bit, unpack Slide 51 a little bit more, perhaps that's got the kind of the calendar arch -- I mean, arc?

Yes. I'll just start, Michael. I mean, I think the key takeaway is '24 is, Jacinth mentioned, it's a year of investment. I would say, it's a year of continued investment, probably accelerated investment in the business because we're not starting this project today. It's something that we have been working on. And the key thing for me is this acceleration of this transformation as we get into '24, '25 and '26. And then maybe Jacinth, I'll have you elaborate a little bit on that cadence over that 3-year window.

Yes. So I'll say -- I'll put it this way, I mean, we have those 3, right, 3 circles because there is overlap in terms of what's going on. So at the back end of it, the $250 million, in our mind, gets us to the higher end of that algorithm, but there is going to be work going on. At the same time, we're continuing to grow the business, the focus on the 5 to 7, doing the transformation while we're doing the value capture.

And if I could just maybe follow up. I'm sure you don't want to be too specific about '24 just yet. But when you talk about the accelerating investments, it's clear that, that's the front-loaded bit of the 3-year trajectory, but would we take that to mean that '24 might be flat or down from an EBIT perspective and then it really kicks in, in kind of the '25 and '26, more towards the end?

Yes. I would say '24, TBD. But as we think about '25 and '26, that's absolutely how we -- how this will play out so that we ultimately get to that number. And I think you saw that on the chart. And so '25 will show, obviously, growth and then '26 will get us to where we need to be.

Rupesh, we'll go to you next.

So again, going back to the algorithm, '24 to '26. Any guidance can you give or just thoughts in terms of how you think about the top line? Would you expect the top line to be below trend in, I guess, is actually '24 and '25? And then as we look at the current business, it implies very minimal operating income growth. Is that simply because of all the investments? Is that just weighing on that bucket in terms of why we don't see much operating income growth in the current business?

I'm sorry, I missed that last part, Rupesh.

Yes. So the current -- if you look at the current business bucket, it doesn't imply much operating income growth in the coming years because all your growth is coming from the $200 million, the other 2 buckets. So is that mainly weighted down by all the investment?

So what we're saying is, over time, that existing business will grow at our historical levels of 5% to 7%. Clearly, as we think about the bottom-line performance for the overall business, '24 will be impacted by investment and then we'll expect to have the returns on that as we accelerate into '25 and '26. From a topline perspective, I mean, we're going to be running the business. And so this isn't a take your eye off the ball on what we need to get done from a retail segment, from a foodservice segment, from an International segment. And so, I mean, we expect our topline to perform. It's the investments that obviously will impact some of the bottom-line performance.

Yes. Just to add, this isn't -- we're going to do this instead of growing the business. This is -- and, right, we're going to continue to run hard with our operating businesses and we're going to also add on top of it, the value that we're going to capture from doing the transformation modernization. So I want that to be clear.

And that -- just to reiterate what I was trying to say is they're both dependent and then -- they're dependent and independent at the same time because we're going to be continuing to focus on all of them but it's when you bring them together that we really are able to achieve that number.

Tom, why don't you go ahead since you're right there?

Tom Palmer, JPMorgan. Wanted to ask maybe just on the costs to realize some of these initiatives. Should we think about -- I mean, you guys traditionally report more of a GAAP earnings. I mean, could we be heading towards more of an adjusted-type earnings to exclude some of these costs? How do we think about some of the capital costs that might be elevated in terms of capturing the savings over the next year or 2?

Yes. No, that's a good question. And so we are thinking through how we report that and segregate it in a way that's visible. And so that is, in my mind, as I sit here today, the expectation that will reflect it in that manner.

So to say what you're saying, Tom, is correct. We're expecting that we'll have those adjustments to reflect the cost to capture across the board.

Peter, let's go to you next.

Pete Galbo from BofA. Just for pure clarification purposes, so the $250 million is growing off a base from fiscal '23, correct? I've just gotten the question from a few people.

Yes.

Okay. And then the actual -- I guess, question back to Michael's first question, I mean, clearly, based on that slide, the majority of the capture comes in '26, but I mean, can we put a finer point around it? Is it the 2/3 of the $250 million capture comes in '26? Is it 3/4? Just anything more to help kind of dimension where that dollar kind of flow-through is?

Yes. I mean, to give you a specific point, '25 is difficult. But one of the things that I do want to mention, so we've talked a lot about this and understanding what we're putting out there is new for us and to look at the slope of that line is it's not something that we're going to say today and then come back to you in 3 years. The way we're thinking about this is we're going to have a specific, we'll call it a webcast, whatever we want to call it a year from now. So that we can sit down with a group, won't be a formal Investor Day, but something that says, as part of this initiative, we're going to tell you how we're doing. And so are we delivering? And as we can narrow some of those time lines for you, we certainly will. So it's not this blind trust-us. We want to make sure that you understand we're going to make sure you're hearing from us that we're doing what we say we're going to do. But I think the biggest takeaway right now is we are going to see the result in '25, but we don't have a specific point in time for you.

We'll go to Rob.

Jacinth, can you explain a little bit why the investment timing is lumpy? Like you mentioned it's going to accelerate investment in people, process, data, tech, modernization. But you've been working on these things for several years now. So what makes it accelerate in fiscal '24 that requires kind of a profit to be impacted?

So we have been -- that's absolutely right. We have been working on this for some time. We had call pause. And so we invested -- for Project Orion, we did the investment and implemented the HR finance piece. We stopped and haven't done much work on the supply chain piece. And so that's now being restarted in earnest here. And so that's why that initial year is going to be a lot as we think about the software that we're implementing for the supply chain, the fact that we've brought on now Accenture to help us do some of this work. So there are pieces that needs to be put in place to now start to do the work. And so that initial -- there is going to be definitely investment throughout the whole 3 years, but that -- there's just that initial piece that we have to then put in place to then start some of the work that's going to be necessary to capture the value.

Okay. Just as a follow-up. You're bringing on Accenture, that's the first I had heard of it. Is that a recent decision? Is it something you realized you kind of had to do? Or was it part of the plan all along?

Yes. So Rob, I would say, it's not new. I mean, they've been a partner as we work through this whole transformation and modernization piece. We always had a plan to make sure that it wasn't just us looking at it so that we didn't have a completely biased internal view. It's easy for us to sit there and say, oh, our supply chain's just enduring some macro headwinds and we'll get better. It's really helpful to have somebody who has a broader purview. So they've been part of the process for a while. It's not anything that's new. I think the key thing in all of this is when -- if we would have laid out a time line for all of you back to 2016, 2017, and you could see that really this journey that we've been on, right, and we started with One Supply Chain, bringing all of our independent siloed supply chains together with a vision of getting to this point, but a lot of work along the way, knowing that we had our Hormel supply chains that were independent and siloed, but we also had this Jennie-O business that was out there that we knew had to be integrated. And so there has been -- this has been a journey, a vision that we've been on to get us to this point. But then even in Project Orion, as Jacinth said, I mean we would have been much further along had we not had to pause for the pandemic, the acquisition of Planters and intentionally, the integration of Jennie-O Turkey Store, right? All of that is added burden to what had to get done. So this isn't something that we woke up 1 day and said, hey, here's an idea. This has been our vision for some time. We're now in a position because so many of those things have happened. We're seeing a normalization of our supply chain, not perfect, but pretty darn good. But now we can put our foot on the accelerator and get back to where we want to be.

Yes. No, I was just going to add that this just accelerate -- certainly, we could have just carried on, on the pace that we're on to say, we'll get this done on our own. What Accenture does is just bring that level of expertise that just accelerates this for us the way we know we need to make it happen faster with really best-in-class knowledge for us to be able to leverage.

And then if I -- I'm sorry, I know there's more question. But the one thing, Rob, I think, is important, too, is probably an added piece is the data and technology part that was always part of it but has become an even bigger part of it since we first put supply chain together, what was that, 5, 6 years ago. And so that obviously is a significant part of the spend as well.

Ben, we'll go to you next.

Ben Theurer from Barclays. Just combined question. So obviously, that will require some CapEx, and you've talked about this investment in that, and we've seen over the last couple of years, more like a run rate, call it, $250 million, $280 million. What's like kind of the magnitude you have to elevate CapEx to invest in '24 and maybe '25 to get to the '26 target? And how are you going to balance that with what now is, of your earnings per share, a very high dividend payout in order to keep that dividend balance growth maintained given the CapEx needs?

Yes. So we'll obviously give you some better visibility here in a few weeks. But I would say the one thing to consider, Ben, is when I talked about that ramp-up in CapEx, a big part of that was the CapEx that we have invested for value-added capacity for our ability to grow the business. And I mean, we'll continue to make those investments. But we've already made along the way some pretty significant investments, and we now have that capacity to support the business. The maintenance piece of the CapEx, that's going to be in every year number. How much we have to spend on the value-added piece or the growth piece, because we've got the capacity based on the investments that we've made, it may not have to be one on top of another because we are in a really good place with our value-added CapEx investments.

And what's the dividend?

What's that?

How's that going to be balanced with the dividend growth? What should we expect there?

I would expect that we would continue -- if I can sit here today and say that, that we're in a position to continue to increase the dividends next year, there is no doubt in our mind. So no concern there at all. And as Jim said, with not having to invest in the capacity that we've already put CapEx into, you think about that trade out that then potentially offset this additional investment in transformation and modernization.

Adam, we're going to you next.

Adam Samuelson, Goldman Sachs. So Jim, maybe a look back a little bit, right? So 2022, operating profit, in line with 2016, were down this year, and it's going to take a couple of years to start building back up based on the way that this has been laid out. The investments in the company in terms of value-added capacity, in terms of M&A have been sizable over the last 6, 7 years. So where in that -- where has the bigger shortfall been in your view? Has it been pricing across different parts of the business? Is it truly the supply chain cost, just you didn't have the control or the visibility into your operating kind of cost base? Help us unpack where the business has not delivered the returns on invested capital in the last 5 to 7 years that is going to take more investment to get back to.

Yes. I think if you just even go look back at the beginning of 2023, and we talked about in Q1 some of our inventory levels that we had. And clearly, that's had an impact on this year. But then how that ties back to the work that we need to be able to do in supply chain on the front end of the business from a demand planning perspective. And so I do think, Adam, there's been this kind of culmination of things that have built up. And as we're looking at this, we're saying, we can't muscle our way through this like we have in the past. And so we don't want to find ourselves in a position nor do we expect to where we say, we don't have the right end-to-end planning. So as a result, we have too much inventory. Making sure that we have the right systems and processes along the way will allow us to make sure we have all those right levels, but then extract that cost that we need to. And Jacinth said it, we've said it several times, is over the last 3 years, for example, this has been a supply in any cost business. And so we haven't taken the time. When we think about the buy pillar and what we buy, we spend a lot of money. And it hasn't been about focusing our time and effort there. It has been, get us the supply. And so it is -- it's a culmination of all those things. It's the planning, it's the buying, it's the making and it's the moving where we have costs that have crept into the system. Jacinth talked about portfolio optimization. So again, our desire to be all things to all people leads to that proliferation. And now it's time for us to look at that in a different way, not in a slash-and-burn mentality, but in a thoughtful way that says, where are we extracting value and where aren't we extracting value. And so it has been -- it's gradually and then suddenly where we've seen some of these costs creep into the system.

And if I can just ask a quick follow-up to that. Is there a part of the plan that does involve some material SKU rationalization that will more visibly impact the topline over the next couple of years? Or is that not really contemplated at this point?

Yes. It's why we're calling it portfolio optimization, right? It's making sure that we responsibly go through the portfolio and say, what are the pack sizes that we have in play that are adding meaningful value and having conversations with customers, right? Or in some cases, maybe we're not pricing appropriately for what the cost is, the true cost is across the enterprise. And so we're looking at all of that. But our goal is not, and we've actually, in the organization say, we're not going to use the phrase that you use. I can't even say it anymore. It's been our -- we can't say SKU rationalization. It's portfolio optimization, doing it in a responsible way so that we look at it with our best interest and our customers' best interest at heart.

While hard to believe, we are at 20 minutes, and we have two more Q&A sessions. And so Ben, we'll get to you first, and we'll just work our way throughout the room. So this first break is going to be 20 minutes. We'll open up the doors here, and you'll get an opportunity to really sample all of our wonderful snacking and entertaining items. So that will happen now. We'll take a 20-minute break. We'll be back at 10:05, and we'll talk about the retail business. Thank you.

Great job. Well done.

Thank you. You, too. [Break]

Well, good morning. Jacinth started by talking about being her first Investor Day, and it's actually pretty hard to believe that this is my fifth Investor Day, so 10 years in the making here. And each time, I think I've spoken to you about something different. I guarantee that 10 years ago, when we were in Minneapolis, we didn't serve you a bento box full of crafted and curated charcuterie and fine bites of snacking and entertaining. And in fact, we likely didn't have most of the brands that are in those box 10 years ago. So when we talk about transformation of the company, you're seeing it, tasting it and feeling it in action. And then another piece I wanted to point to is you might have seen our culinary collective, Mark Ourada and the foodservice team have stood up. We've had chefs embedded in the business. But as we went through the Go Forward transformation, we stood up a culinary collective that supports our total business. And you're saying, okay, so what? It really does inspire us each and every day, and they show us how our food shows up, not shows up in the package, but shows up in how we're going to eat the products and enjoy them, how our consumers are going to enjoy them, how our shareholders may buy them and bring them home to their houses. And so wanted to just talk you through that as well as thank our culinary collective because they truly inspire us, whether we're working with foodservice, we're working with international or retail. And that shows up in our customers, and we'll talk through some examples of that here. Don't want to get hungry. All right. So I want to start by talking about our new organization and the power of the brands that we brought together. So when you think about the retail organization in the past, it lived in a variety of different businesses. And today, we're one business with all retail brands. We brought together sales, marketing and Brand Fuel, all of those assets under one roof. And we're going to talk to you today about the power of that. Can you move forward, please? Thank you. So over the course of the next section, I want to take you through the benefits of our new retail business unit, which brought all of our sales, marketing and brand assets under one roof. And I also want to review the important role our brands play across retail and how we're thinking about growth and profitability. Today, I'm thrilled to talk to you about our integrated retail business, an $8 billion powerhouse of brands, exceptional talent and best-in-class capabilities. My message to you is simple. We're bigger and we're better resourced to deliver growth with our brands and to build better margins by leveraging our capabilities and our talent. To bring the structure together, we aligned under 6 verticals based on how consumers think about our brands, our manufacturing capabilities, our customer synergies. For example, Convenient Meals and Proteins is focused on meeting the consumers' need to put dinner on the table every night. While Snacking and Entertaining leverages insights and innovation to follow the consumer around the store in search of snacks and indulgence. And value-added needs, well, they're aligned to the retailer's meat case. And by aligning our brands in this way, we can leverage shared resources, production assets, innovation processes, and we can do this all within the vertical. So Bacon is a great example of this, where we now leverage insights and innovation ideas across all our Bacon brands to determine which brand is best aligned to the innovation, the consumer or the customer. The same applies to Snacking and Entertaining. And when we think of snack nuts, nut snacking now has truly left the aisle and nuts can be found all over the store, both physical and virtual. And we can leverage our brands, Planters, Columbus, Justin's, depending on the insight and the need state. This past year, we've been busy standing up the new structure, building our long-term strategic plans and establishing our culture as one integrated retail team. While at the same time, we were fighting inflation, consumer spending shifts and demand dynamics. As you can imagine, this was grueling, but necessary. And we're starting to see the benefits from tighter alignment, resource optimization and added agility to adjust to a shifting economy. The new structure benefits from the best of 7 sales and marketing teams and is augmented by Brand Fuel and financial planning and analytics. A strong structure needs strong brands, and our new structure is designed to unlock the power of our brands, brands that deliver choice for our consumers like SKIPPY and SPAM as pantry staples, and Black Label, an actual choice as weekday favorites, or Jennie-O and Applegate as health -- for health-minded consumers. There were many lessons during the pandemic but one of the most important ones is that retail brands remain a mainstay in consumers' lives. This really hasn't changed, but what has changed is how, when and where consumers interact with our brands. The consumer is no longer following food up and down the aisle. They are simply following food in-store and online. And we are fortunate that our portfolio allows us to intersect with consumers on their food journey. And we can take a holistic approach when setting long-range goals with our customers. The portfolio also resonates across various channels, which is exceptionally important in today's environment where consumers are shopping across several segments, and we continue to benefit from our earlier focus on e-commerce through our digital experience group. The brands shown here are purely representation of some of the brands that we sell across channels. Our $8 billion retail portfolio has many brands in varying size, growth and profitability. Some brands drive the category like Planters, Jennie-O, SPAM and Hormel Pepperoni, while others are challenger brands going after market share like SKIPPY and Black Label. Our emerging brands are responsible for growth that outpaces the categories and delivers innovation like Applegate or Herdez and Columbus. These brands are supplemented by a variety of other brands that play an important role in our consumers' lives and our customers' businesses. It's important to look at our brand performance holistically, and we are encouraged by the performance of many of our brands to last year and against a 4-year snapshot shown here. Our brands remain relevant with our consumers and our new structure allows us to leverage our brands and capabilities and talent to go further than we've ever gone before. Having an $8 billion powerhouse of brands is only the first part of my story. The other part of the story is how we're thinking differently as one retail organization to drive growth and profitability. The retail channel has emerged from the pandemic with 86% of meal occasions being sourced from retail but how, when and where this happens has evolved. And it was important that we evolve to ensure that we're meeting the needs of our consumers and customers. The retail leadership team has designed 3 strategic anchors that will unlock long-term growth: winning with the consumer and customer; strategic resource allocation; and improving our margins. Easy to say, a little bit harder to do, especially in our old structure. As a consumer packaged goods company, it's imperative that we start by winning with the consumer as this is the oxygen we need to win with our customers. The current and future operating environment really was the catalyst for evolving our operating model. Said differently, we had to change to align to a more dynamic consumer who's facing economic uncertainty, a consumer who's younger and more diverse, a consumer who's concerned about the environment and their wellness and finally, a consumer who follows food, not the aisle. Today, we have a portfolio that is well balanced and positioned against the current consumer considerations and Scott, our new Chief Marketing Officer, will talk to you soon about what he's doing to ensure our portfolio continues to evolve to meet consumer needs. But we can't win with our consumers without our customers. Our new structure allows us to harness our $8 billion scale as we approach our customers with the ambition to be an indispensable strategic partner. We do this by activating leading insights in everything we do and creating an empowered team who leverages resources to exceed our customers' needs and by creating food-forward experiences for our customers, like you experienced this morning. I want to share a few proof points that our changes are exceeding customer expectations and driving growth through innovation and leveraging insights-based selling. I want to start with SPAM, that we have an excellent video coming up. So I don't want to steal the team's thunder. But the piece that I'll add to the video is they're going to talk about some really rich insights. Those insights led our sales team into action and our production team because insights told us that we needed to reactivate 7-ounce SPAM for consumer who's worried about money in their pockets. They also led us to relaunching our SPAM Singles as the economic environments changed, and it led us to the insight to launch SPAM Maple because it's attractive to different cultures and different demographics from a younger consumer perspective. So I'll move to Planters and we're going to talk about channel expansion. And I want to highlight the Planters insight because when we acquired Planters, there was not a lot of channel expansion in club. And when you think about the Planters brand and the Corn Nuts brand joining the Hormel Foods portfolio, we saw a consistent opportunity for sustained growth by penetrating channels, in particular club. Now when we -- why we're attracted? The club is the customers continue to skew younger, think millennials and Gen X. And we married this up with where our new flavored cashews, which I hope you enjoyed, and holistic performance of the Corn Nuts brand from a consumer demographic perspective. And in doing so, we were able to articulate that we're meeting the right consumer at the right time with the right products. Flavor continues to be king within Snack Nuts, and you'll continue to see us evolve with flavors in the snack portfolio. That would be a bedrock of our innovation strategy. These insights, coupled with direct feedback from our club customers and our customer teams, allowed us to launch this past year, cinnamon brown sugar-flavored cashews, specific for the club channel, and a multipack of grape-flavored Corn Nuts, all in 1 box. There's 4 flavors. And this step into channel expansion will act as a springboard of innovation initiatives as we penetrate this underdeveloped business as one example. Next, I'd like to point to significant new distribution on Herdez, specifically Herdez Habanero hot sauce and Herdez avocado dips. By leveraging the consumer insights around snacking and avocado consumption as well as category growth within hot sauce, we secured a projected 6,800 points of distribution between Herdez Habanero hot sauce and Herdez avocado dips. The Herdez brand growing at double that of the total Mexican category, reinforce the power of the brand that consumers trust. The team demonstrated that the Herdez brand vision of bringing authentic Mexican experiences to every American table and occasion, and they did this by food-forward experience like you experienced this morning. And they conducted a full portfolio food-forward experience for the particular customer. And this happened in April of this last year. These new points of distribution are proof in our approach in bringing food to life for our customers and how it resonates with their consumers. Our second strategic anchor is resource allocation. And at the heart of the strategy is our modernized brand segmentation, which aligns our brands as flagship, think big and material, rising, small, differentiated and high growth and foundational, our Steady Eddies. Our flagship brands are larger and more profitable and as a result, deserve consistent advertising, experienced marketing teams, heavy R&D resources to drive innovation and dedicated supply chain assets. Meet our rising brands. While smaller, they pack a one-two punch and they're mighty because they deliver both growth and margin. These brands are thirsty for investments to fuel the growth and they're attractive to younger and more diverse consumer and who, by the way, our customers are following the same consumers as well. These brands can be high maintenance and this is where the resource is within Brand Fuel, and you'll hear about this shortly in the video, we bring those assets to bear against these brands. Our foundational brands, well, they pay the bills and they help us turn on the lights every day. And the focus here is to protect market share and cost containment. And this requires experienced product management teams who understand our operating network to drive efficiencies. Our final strategic anchor is to evolve our margin structure towards our CPG peer set, while remaining rooted in protein. As we've already shared, our brands are relevant with our consumers and we're looking forward to continuing to target additional consumers. These brands deserve our fuel, and expanding our margins for these brands allows for increased advertising, innovation and CapEx to fuel growth. While we have good balance across our portfolio, we have clear opportunity, appetite and the path to improve our margin structure. This is our formula for success and why I'm comfortable declaring our ambition of 30% gross margins across our strategic brands and an improvement in our segment profit of greater than 10% over our long-range plans. The formula starts with brand stewardship, which optimizes price, mix, innovation, and brand -- sorry, Brand Fuel and our brand teams and our revenue growth management teams are the catalysts here. Next is our portfolio optimization, which we've already heard about, which focuses on reducing costs and complexity and is directed by our financial planning and analytics partners. Our supply chain team plays a big role in reducing our costs, and we have a path to improve our SG&A as well. As stewards of this new $8 billion powerhouse of brands, we're responsible for generating the returns needed to continue to transform our business as a global branded food company. And I can't leave our third strategic anchor without touching on the elephant or maybe, the big peanut in the room, Planters. Our journey with Planters has evolved. The first year was purely focused on integrating the business. And the second year was about running the business, and we accomplished those 2 things. But this year has been more dynamic, and we needed to adjust our approach from renovation to transformation. Earlier this year, we created a tiger team of experts, cross-functional experts, focused on transforming Planters. The team is focused in 4 key areas: brand stewardship, portfolio optimization, supply chain gains, and SG&A savings. The team is making progress. The brand is being repositioned with our advertising strategy, and we've shifted advertising to and always on as opposed to a more seasonal approach, which is driving better ROI and having everyday impact on the brand. The portfolio is being optimized and modernized to align with the consumer and growth, and you've experienced some of those products that we've launched here recently. Supply chain is working hard on optimizing our plant assets to align with growth and innovation. And while we've made progress, the transformation of Planters remains a top enterprise priority. In summary, we're consumer-focused to drive growth across our businesses, and we're better allocating resources to optimize performance with our consumers and our customers. We are committed to improving our margin structure for better support and long-term sustainable growth. In order to do this, we recognize the need for a Chief Marketing Officer through our Go Forward transformation. It's my pleasure to introduce Scott Aakre, the first Chief Marketing Officer for Hormel Foods.

Good morning, everyone. It's great to be here today. It's great to have a chance to talk about our consumer journey and how we are winning with the consumer today and how we're going to continue to win with the consumer tomorrow. There's a few things I hope that you walk away from this part of the presentation with. The first is that our portfolio is complicated, but it's built for growth. And we consider the complication of our portfolio to be a competitive advantage. The second thing is the way that we're going to win is built through insights, analytics and innovation. And third, the creation of One Retail is what has enabled this go path -- this Go Forward path. And so I hope, again, those are things that we hear as we go through this. Jim described our company as an uncommon global branded food company. But what does that look like for the retail side of our business? It starts with our collective branded portfolio of being an 85% of all households across the U.S. and covering all generational groups. We think that's important for our customers. We think that's important for our shareholders. The more households we're in, the more opportunity we have to learn about that household and the greater chance we have to introduce one household that's with one of our brands to other brands in the portfolio and to grow by making each of those households more productive. So the complicated or the complex portfolio really enables us to think about household productivity in a new way. We're also growing demand by extending the portfolio and our footprint into younger, more ethnically diverse consumer groups. We're thoughtfully watching the changing demographics in America. And we know that Millennials and Gen Z are having an impact on the food agenda. Younger consumers want to try new cuisines, they want variety, they want choice. And oftentimes, that choice is around a shared experience or the snacking or entertaining space that we look at. So being forward-looking and watching those demographic shifts have had an important part in the way that we've shaped and constructed the portfolio that Jim and Deanna and Jacinth had talked about. An important part of our One Retail was to stand up this thing called Brand Fuel. What we did was we built a center of excellence that was allowing team members with specialized skills to create solutions across the enterprise. The Brand Fuel team focused on consumer and shopper insights, data analytics, product innovation, media strategy, creating an omni-experience for the consumers. The other thing we did was we have an uncommon person on our team, Dr. Tanya Rodriguez, is part of the Brand Fuel team. Tanya is a social worker, but she's also a cultural anthropologist. And she's on the team to help us coax out the why things are happening, not just what things are happening. If you can imagine, it's not surprising when we talk to consumers, and we go to their home and they say, all I do is eat really good foods, organic, natural, whatever. And then when Tanya digs through the garbage can, she finds bags of doughnuts or empty cartons of cookies. So we know that the consumer says one thing, but really, the behavior's different. We want her to help us understand that. Finally, the Brand Fuel team and the creation of One Retail have enabled us to scale an $8 billion retail business, which gives us leverage in the way we negotiate with our agencies, the flexibility to shift resources from one opportunity to another to find those greatest opportunities for return to the company. I want to bring the Brand Fuel team to life through a quick story and then a video. So SPAM is an 86-year-old brand. But wherever we go as a company and whenever we say, we work on SPAM. The reaction from people is, Oh my God. Do I have a story for you? And we know that, that's important for this brand and for all of our brands. They're built on stories. And we know that there's common threads in those stories that bring out the emotional part of the brand to move it from being a product to being a brand. So when we listen to those stories, what we find is that we can embrace things, we can find those common threads and we can completely imagine new opportunities to keep our brand relevant and to find new consumer targets. So through those stories, we can segment consumers, we can geo-target the message, we can innovate new products or new recipes. And that's why brands are important. That's why brands matter. If you think about SPAM as a product, it's canned meat. But that's not what we sell. We sell a brand. And we are out to the consumer, talking about a brand that as canned meat has had 8 consecutive years of record sales. That's what Jim talks about when he says we are a branded global food company. And when we're done today, if you're still hungry, you can find SPAM on the Michelin recognized Norte restaurant in the East Village. That's how important this brand is. Hopefully, the video and the next few seconds here will help show you Brand Fuel and bring even the SPAM brand to life in a bigger way. [Presentation]

Born in America, raised around the world. We're a food company. Food is at the center of our culture and brands are at the center of the emotion that brings out the value to that consumer. When Jim talked about transformation, he talked about investing in our brands. We continue to invest in our brands. But we look at it differently. It's not just, do we have more money? Do we think about the way we're investing in a different way? We use marketing mix analytics to scale and improve the way that we are increasing ROI with consumers. Deanna mentioned Project Roast. When we bought Planters, one of the things that we knew about the brand is they had a commitment to Super Bowl. We looked at that from an analytics standpoint. And we realized that if we took that one time, that 2-week flash and moved it into an all-in strategy, we can increase the ROI by 4x. That's the kind of work that we want to do across, not just Planters, but the portfolio, to make sure that we continue to invest, but we invest in a different and smarter way. Jim highlighted the strategic platforms within our company. I'm going to cover 3 specific areas right now: Global flavors, Entertaining and Snacking, and Natural and Organic. All of these are important pieces to our winning strategy and winning with the consumer. Our Global Flavors pillar is anchored by the joint venture agreement that we have with our Mexican partner, Herdez del forte in Mexico. Through the partnership, we created MegaMex. It's a stand-alone company with a singular focus of reimagining the Mexican food experience in the U.S. Mexican food is the top ethnic cuisine with Millennials and aligns perfectly with the spicy food demands of Gen Z. We see MegaMex as a significant platform for our retail business growth. The portfolio is anchored by 2 power brands, Herdez and Wholly. The Herdez brand brings authenticity to the salsa and sauce category with products and flavors that have been developed over generations by the Hernandez family. The Herdez brand stretches equally between general market and Hispanic consumers. And the brand has effectively extended into refrigerated salsa and refrigerated guacamole, which is important for our customers and consumers by providing a brand solution for the retail deli that complements the Wholly brand, which is the brand leader in the produce set. Wholly is the brand leader in retail guacamole and has extended to provide convenient avocado solutions and is really the one that is providing convenience versatility to consumers, along with a rich success record of innovation. We have been on trend, we see growth in the transition of households from fresh avocados to prepared guacamole. Household penetration for avocados is 70% household penetration for refrigerated guacamole is 25%. And we know that 95% of the people that buy avocados are making guacamole. So there's 2 main strategies that we have, the deli and the produce set, really gives us a chance to surround that consumer and that shopping experience with solutions that make sense in this Mexican food space. Reimagining Mexican food required a strong innovation pipeline, and it's really the cornerstone of the MegaMex success formula. It goes beyond the national brands. We also have brands like Cicis, La Victoria, Doña María, all are in this innovation pipeline. Our work delivers new ideas for both the retail and foodservice, bringing authenticity, convenience, together to serve both consumers as well as our operators. We're committed to the Mexican food space, and we believe that the strong partnership with MegaMex is the ideal business model to create absolute focus in this space. With the work of Brand Fuel, we also identified that there was an additional opportunity to take the Herdez brand and provide convenient and authentic heat-and-serve meats. Leveraging our One Supply Chain, we could use our network, existing assets, our refrigerated distribution system and the power of the brand. These products are jointly developed between our side and Mexico to make sure that they're authentic in that we have the partnership of MegaMex in terms of the branding and the communication that we put out to the consumer. And we're gaining important distribution across key customers that not only complements our dinner strategy, but helps to bring in new households into the Herdez franchise as well. Another area for us is Snacking and Entertaining, which is an important pillar within our portfolio and the behavior that matters for nearly all households in the country. Half of all American snack 3 or more times a day, and that percentage is highest with younger consumers. In addition, 85% of households engage in something called home entertaining. And from the insights work that we've done, we call it casual gatherings. And that could be a Friday night where maybe some friends stop over or maybe it's a Friday where you're just tired of frozen pizza, you want something else. We look at that and think, okay, here's a big opportunity for our portfolio. Connecting those insights with some analytics work, we understood that 15 -- that the average household has this casual gathering 15 times a year. So Super Bowl's important. We still promoted Super Bowl. But now we know that 130 million households have an activity called casual gatherings 15 times a year that we can participate in. That's 1 billion occasions a year, and we have a portfolio designed to fill that space. Our portfolio is built for consumer choice and to serve a variety of occasions and need states, we provide coverage across income groups, generational groups. We have access to all retail channels and formats. We provide solutions that matter for both winning with the consumer and winning with our customers. We're using innovation with our legacy brands to extend these franchises to more younger and ethnically diverse consumers. We're addressing the demands for new flavors, new textures, like our pepperoni crisps and licensing partners like on your table today, where we've connected SKIPPY to the Girl Scout cookie franchise, which is, again, a younger consumer that brings into that franchise. We're seeing some early wins with the Planters flavored cashews. We're bringing in new consumers to the category, to the brand as well as to the aisle in that center store, which is so important to our customers. And some of the early work that we've done would suggest that we've doubled the index with Gen Z by bringing out these flavored cashews. So we know we're on the right path with the portfolio of work that we're doing. Innovation matters here, and we're leading with innovation in this category. We also know that many consumers make food choices based on the demand for natural or for organic. And that many also choose brands based on their social interests in areas like sustainability and animal welfare. While these interests are important to all of Hormel, they are the focus and the work that we do with the Applegate brand. Applegate has a leading position in natural and organic, in categories that are important to consumers and that makes them important to our customers. The brand team continues to provide thought leadership in areas like regenerative farming and other environmental practices, all while providing convenient, flavorful meal and food solutions. While these scale -- well, with the scale of One Supply Chain, we've been able to add manufacturing efficiencies. And through One Retail, we've been able to significantly increase the consumer access to this brand across all retail channels. The breadth of the Applegate portfolio is purposefully and uniquely designed to address all dayparts, food at home, food away from home and a variety of taste expectations. We've partnered with customers to make sure that we're aligned with their key initiatives, and we've done all this while staying committed to the purpose-driven agenda of that brand. We're committed to winning with the consumer. We built the portfolio for growth. The complication and complexity of our portfolio is important to us. It's a point of difference. Our winning formula is built on insights, analytics and innovation. And Go Forward, as we've described it today, is really the catalyst that enables us to go forward in the future. So with that, I think I'll turn it over to Dave, and we'll go through some Q&A.

Great job.

All right, Ben, we're going to start with you as promised and we'll continue to work our way around the room.