Kellanova (K) Earnings Call Transcript & Summary

Good afternoon. Welcome to Kellogg Company's 2020 Annual Shareowners' Meeting. I will now turn the call over to CEO and Chairman of the Board, Steve Cahillane.

Good afternoon. Thank you for joining us today for Kellogg Company's 98th Annual Shareowners' Meeting. As you are aware, we're in the grip of an unprecedented pandemic. As a leading global food company, we know being in the food industry is a special privilege with great responsibility. Traditionally, our Annual Shareholders' Meeting are held in a public forum in Battle Creek, Michigan. However, following both federal and state guidance requiring residents to stay home to slow the spread of the coronavirus, we're hosting this year's meeting virtually. Our primary focus is the health and wellbeing of our employees, shareowners and all stakeholders. Our decision to switch to a virtual-only meeting is only applicable for our 2020 meeting. Before we continue, it is with sincere gratitude and respect that I say thank you to all of our employees as we remain steadfast in our commitment to provide much-needed food and support to people and communities around the world. I would also like to thank our Board of Directors who are joining us virtually today. Now it's my privilege to call to order the 98th Annual Shareowners' Meeting of Kellogg Company. As we begin, I want to take this opportunity to remind all of us that every day, no matter what is happening around us, Kellogg Company plays a unique role as an iconic company, making and selling food that is safe and delicious while addressing food security needs globally. Today, during this global pandemic, our role becomes even more essential as people's lives and day-to-day activities are drastically changed. People are staying home to stay safe, not eating out, less frequent grocery shopping, and schools are closed which means limited access to food for many of those children and families in need. The food we make, nutritious, safe, frozen and shelf-stable food, is critical to sustaining life and providing a sense of safety and security. As we turn to Slide 3, you can see that at Kellogg, the health and safety of our employees worldwide is our #1 priority. Since the onset of the coronavirus, we have been actively monitoring this situation and taking measures to ensure our employees are safe and to ensure the continuity of our business. We acted quickly. We placed travel, visitor and large meeting restrictions in place ahead of the curve. We installed additional safety supplies, social distancing protocols, enhanced sanitation processes, temperature checks for all employees and visitors and incremental cleaning protocols in all facilities globally. And we implemented work-from-home policies around the world. We are taking measures to manage business continuity, including plans to help ensure we have sufficient ingredients, packaging, inventory and logistics support. We are adjusting our manufacturing and distribution plans as needed to ensure we best meet the needs of our customers and our consumers. Our plans will continue to evolve as there's new information and updated guidance from the World Health Organization, the CDC and other local health authorities. As you can see on Slide 4, during this time, bringing our best to you has taken on a whole new meaning at Kellogg. We are coming together to support each other and our global community. Our dedicated frontline employees, who are making the food and making sure it gets to the stores, are working every day to get food out the door because simple things like sitting down to breakfast are more important than ever. But we do not do it alone. We are grateful to those who are part of our extended Kellogg family, those who deliver our foods to customers and keep shelves stocked, those who work in grocery stores to ensure shoppers have safe access to what they need to feed their families. We are also thankful for our global food bank partners with whom we work to feed people in need. In the face of adversity, Kellogg employees always step up. Amid the current pandemic, which is unlike anything we've seen in our lifetime, the degree to which our teams are coming together to overcome challenges, keep each other safe and the business operational is not surprising, but it is inspiring. In recognition of the heroic efforts of our Kellogg employees and partners around the world, we recently launched a special TV spot that celebrates those individuals and their collective work to ensure people are fed in these most uncertain times. I would like to play this spot for you now. For those of you who are not on the webcast and listening by phone, you will not be able to hear the spot, so please expect silence for about 30 seconds, but please do stay on the line. [Presentation]

As you can see on Slide #5, Kellogg's heart and soul has never been more apparent than now as we work together across our company to help our food bank partners and neighbors in need during the coronavirus pandemic. To date, Kellogg and its charitable funds have now donated more than $10 million in food and funds to global COVID-19 food relief efforts, all aligned with our global Kellogg's Better Days purpose to address food and security, and we continue to evaluate need in our communities. Local governments have identified food security as a top priority in their fight against COVID-19. With school and business closures and an increasing number of shelter-at-home mandates, Kellogg is providing additional support to our food bank partners on the front lines, helping those who may not know where their next meal is coming from. In every region, our food bank partners are stretched to their limits. They're providing more food to more people, and they're doing so without their strong network of volunteers. They need us now more than ever. And finally, as you can see on Slide 6, there is one more important group we would like to acknowledge this afternoon, and that's our veterans. We would like to pay tribute to some very special members of our Kellogg family, those who are currently serving our country in the military. We thank you for your incredible service and hope for a safe and quick return home to you -- to your loved ones. Your courage and dedication are an inspiration to us all. So in turning to Slide 7. As a reminder, our order of business will follow today's agenda. As usual, we will also have time for questions and answers later in the meeting. On our agenda today, we have the election of 4 directors, approval of an advisory resolution for executive compensation, the ratification of the appointment of the company's independent auditors, approval of the amendment and restatement of the Kellogg Company 2002 Employee Stock Purchase Plan, a management proposal to declassify Board of Directors and a shareowner proposal. As the company's bylaws provide, I will act as Chairman of this meeting. Also on the call today is Gary Pilnick, our Vice Chairman, who will act as secretary of the meeting. The Board of Directors has appointed a representative of Carl Hagberg & Associates to act as an independent judge of election. The customary oath of office has been taken and signed and will be filed with the records of the meeting. His function is to decide upon the qualification of voters, accept the votes and tally the ballots cast. Also present virtually today is a representative from PricewaterhouseCoopers, our company's auditors. During 2019, our Board of Directors held 8 meetings. Each of the incumbent directors attended at least 75% of the total number of Board meetings and Board committee meetings on which the director served. I would like to introduce you to the company's directors and nominees. Nominees standing for reelection are: Stephanie Burns, Richard Dreiling, La June Montgomery Tabron and me. Directors whose terms do not expire this year and are continuing in office are: Carter Cast, Roderick Gillum, Zachary Gund, Jim Jenness, Don Knauss, Mary Laschinger, Erica Mann and Carolyn Tastad. Now as we turn to Slide 8, would the secretary please report on the mailing of the annual report, notice of meeting and proxy statement and advise whether the necessary quorum to conduct the meeting -- the business of the meeting is present?

Mr. Chairman, beginning on or about March 10, 2020, copies of the annual report on Form 10-K, notice of the annual meeting and proxy statement were distributed to each holder of record of common stock at the close of business on the record date for the meeting, February 28, 2020, which is in accordance with the bylaws of the company. We have received an affidavit attesting to this mailing. A list of shareowners as of the record date has been duly certified by the transfer agent. That list has been available for inspection by the shareowners for the past 10 days and is available on the shareowner annual meeting webcast during this meeting for examination. In addition, I have been advised that there are present in today's meeting holders of approximately 305 million shares, representing approximately 89% of the shares of stock entitled to vote. Since the majority of the company's shares are represented here today, a quorum is present, the meeting is duly constituted and the business of the meeting may proceed.

Thank you, Gary. The report of the secretary on the existence of a quorum is accepted. I direct that the affidavit of mailing is to be made part of the minutes of the meeting. On behalf of the Board of Directors, we would like to express our appreciation to all shareowners who returned their proxies. The first order of business to come before us is the election of directors. The 4 nominees for reelection to the Board for a 3-year term expiring at the 2023 annual meeting are: Stephanie Burns, Richard Dreiling, La June Montgomery Tabron and me. Information concerning the nominees' experiences and qualifications is in the proxy statement. The company's bylaws require that a shareowner provide advanced notice to the company of a shareowner's intent to nominate persons as directors. No such notice was received. Therefore, I declare the nominations for directors closed. The next order of business is the advisory resolution to approve executive compensation. At this time, I would like to ask Gary to present the proposal.

The Board of Directors has recommended that the shareowners vote for the resolution approving the compensation of our named executive officers as disclosed in the company's proxy statement.

The next order of business is the proposal to ratify the appointment of an independent registered public accounting firm for fiscal year 2020. At this time, I would like to ask Gary to present the proposal.

The Audit Committee has appointed and the Board of Directors recommends that the shareowners ratify PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for fiscal year 2020.

The next order of business is the approval of the amendment and restatement of the Kellogg Company 2002 Employee Stock Purchase Plan. At this time, I would like to ask Gary to present the proposal.

The Board of Directors recommends that shareowners approve an amendment and restatement of the Kellogg Company 2002 Employee Stock Purchase Plan.

The next order of business is the management proposal to declassify the Board of Directors. At this time, I would like to ask Gary to present this proposal.

The Board of Directors recommends that shareowners approve the declassification of the Board.

The next order of business is the shareowner proposal to adopt a simple majority vote. I understand that James McRitchie is on the line to present the proposal. James? James?

Can you not hear me?

I can hear you now -- I cannot hear you, James.

Can you hear me now?

Yes, sir. I can hear you. Yes.

Okay. Kellogg Company shareholders request our Board to take the steps necessary so each voting requirement is replaced by majority standard, consistent with applicable law. Shareowners are willing to pay a premium for shares of companies that have excellent Corporate Governance. Super majority voting requirements have been found by academics to be 1 of 6 entrenching mechanisms negatively associated with company performance. Super majority requirements are used to block initiatives supported by most shareowners but opposed by a status quo management. The majority of the S&P 500 and S&P 1500 companies have no super majority voting requirements. Unlike many S&P and S&P 15 -- S&P 500 and 1500 companies, our shareowners cannot act by written consent or call special meetings. This burdensome requirement regarding the super majority vote standard should also be seen in the context that Kellogg maintains a classified Board, even though more than 61% of shares voting in 2019 voted for our proposal to elect shareholders -- or to elect directors annually. Hopefully, that will be remedied by your vote at this meeting. Last proxy season, shareholder proposals on this topic won over 90% at Legg Mason, Exxon Enterprises, L Brands, Skyworks Solutions, Leidos Holdings; 70% of the vote at Netflix, New York Community Bancorp, Xerox, OGE Energy, Dean Foods, Conoco Products; more than 50% of the vote at PetMed Express, Eldorado Resorts, Reflex Health, Alarm.com Holdings, Flower Foods, FirstEnergy, Norfolk Southern and Intuitive Surgical. Please vote to enhance shareholder value, vote for simple majority vote. Thank you very much.

Thank you, James. The Board's position to this proposal is included in the proxy statement. The Board has carefully considered the proposal, and we believe that it is not in the best interest of the shareowners. Consequently, the Board recommends that the shareowners vote against the proposal. Because there is no further business scheduled to come before the shareowners, I declare the polls for voting on each matter before this meeting are now open and direct that a vote of the shareowners be taken. Please remember, if you have returned your proxy, your vote has already been recorded. The polls for voting on these matters will remain open for 5 minutes and will then be closed. After voting has been completed on all matters on the agenda, votes will be tabulated by the proxy judge. While the votes are counted, I wanted to provide you the following update on our business. Afterwards, you'll have an opportunity to ask questions. Now on Slide 9. Before we begin our business update, I need to remind you that some of the statements today, such as Kellogg Company projections for future performance, are forward-looking. Our actual results could be materially different from the projections, including as a result of the ongoing uncertainty around the impacts of COVID-19. For information about the factors that could cause this difference, please refer to our 2019 annual report on Form 10-K. Let's move on to the agenda on Slide 10. Keep in mind that the results we are about to share are from 2019, not our Q1 2020 earnings, which will be reported next week. 2019 was a very important year for Kellogg Company and entered 2020 from a position of strength. We are making very real progress on our Deploy for Growth strategy. We are back in organic net sales growth and are gradually improving our profitability. This afternoon, we're going to take a look at progress against our Deploy for Growth strategy and then open up the line for questions. As you can see on Slide 11, our Deploy for Growth strategy isn't just words on paper, it's driving changes in behavior and big tangible actions. Deploy for Growth is directing us to win through occasions. In 2019, we launched our best slate of innovation in years. We expanded pack formats and we improved our revenue growth management. Deploy for Growth is also directing us to shape a growth portfolio. That's why in 2019, we divested noncore businesses to give us greater focus while improving the growth and margin profile of this business. We invested in local production capacity in several emerging markets to facilitate long-term growth, and we rapidly built up a new leg of growth for us, noodles in Africa. Deploy for Growth has us focused on building and growing world-class brands. That's why in 2019, we continued to invest behind and grow our biggest, most advantaged brands while planning to extend our revitalization efforts to other brands this year. Deploy for Growth also has us focused on executing perfect service and perfect store. In 2019, we made good progress on our sales strategy and service, and we were recognized in third-party surveys like Kantar. This improved execution will continue in 2020. On Slide 12, you can see our growth is being driven by our biggest, most differentiated brands. Our top 5 U.S. Snacks brands are shown on the slide. As you can see, in 2018, these 5 brands accounted for just under 60% of our U.S. measured channels consumption, which then included cookies and fruit snacks. Led by these brands, nearly 8% consumption growth, our U.S. Snacks consumption grew nearly 1.5% that year. Fast forward to 2019, following our divestiture of cookies and fruit snacks, these same top 5 brands now represent nearly 3/4 of our U.S. Snacks consumption. And as they accelerated their collective growth to almost 10% year-on-year, they drove an acceleration in our overall Snacks consumption growth to more than 4.5%. That's a reshaped portfolio at work and that's revitalized brands at work. For 2020, we know we have to lap an unusually strong year for innovation. Nevertheless, we have strong commercial plans. Now let's turn to cereal on Slide 13, which was about 1/3 of our North America sales in 2019. In the U.S. last year, we made the decision to harmonize our pack sizes and prices to make our brands much more shoppable on shelf and to give us, at long last, the ability to merchandise more combinations of brands together. We executed it in 2 ways during the first half of last year and had to pull back brand support during that time. The result was lost share in consumption, but we think that it was the right thing to do for the long-term health of this business. It's fully behind us now and we resume normal levels of commercial activity starting in quarter 3. As you can see on the chart, this resumption of activity dramatically moderated our share declines in the fourth quarter, and our share stabilized further in January. And that's just a function of getting back to normal activity. We're also going beyond just replenishing the brand-building we pulled back during last year's pack harmonization. We're adding incremental investment aimed at revitalizing key brands and boosting our innovation. Now let's turn to our Frozen Foods business on Slide 14, which accounted for more than 10% of our North America sales last year. Eggo is obviously a tremendous brand, and in what we call the from-the-griddle category, it grew again in 2019 in spite of lapping 2 years of exceptional innovation-led growth. In 2020, we are bringing food renovation to our core waffle platform while building on last year's expansion of pancakes and the successful launch of a new French toast offering. We'll also continue to extend and advertise our premium waffle line, Thick & Fluffy. Meanwhile, our Kashi brand is having success leaning into the natural and wellness occasions, and we're moving it into high-protein offerings in 2020. On Slide 15, it's in our Morningstar Farms plant-based protein brand that we have the best growth opportunity. Consumer demand for plant-based protein is rising for dietary and environmental reasons, and this has accelerated the frozen plant-based protein category to high single-digit growth in recent quarters. Our Morningstar Farms brand accelerated to double-digit growth, gaining share as a result. This reflects the strength of our brand and the quality of our food as well as effective brand-building aimed at expanding household penetration. We're gaining distribution, and we're growing across product types. We'll leverage these factors again in 2020. We'll be launching several exciting innovations, including Incogmeato. The ready-to-cook side of plant-based meat alternatives is in the early phases of consumer awareness. To further drive household penetration and adoption, Incogmeato will give Morningstar Farms a presence in the refrigerated meat section, making it easier for the consumer to shop. We have the right to win in this segment. We have better food crafted with simple ingredients, a positive nutrition profile versus meat, a brand that is already known for high-quality foods and a well-established supply chain. So we expect continued strong growth from the frozen side of Morningstar Farms this year. As you can see on Slide 16, 2019 marked another year of solid growth across our international regions. In Europe, we had another good year and quarter 4 was our ninth straight quarter of organic net sales growth in this region, a region with some very mature markets and challenging retailer environments. Leading our growth has been Pringles, which finished with high single-digit consumption growth in the quarter and for the full year. In Latin America, 2019 was a year of momentum, transition and economic challenges. The momentum was principally in Mexico. In this key market, we continued to drive consumption and share growth in 2019. The transition was in Central America, where we are changing distributors and in Brazil, where we are transforming our supply chain. The economic challenges came from Puerto Rico, our biggest market in our Caribbean and Central America subregion. While the economic challenges may persist, we like how we are positioned in these markets. In our Asia Pacific, Middle East and Africa region, we finished 2019 with a very strong organic net sales growth across the region. Our Africa strategy continued to play out with a first full year of Multipro in our results as well as the realignment of our Middle East, North Africa and Turkey business into EMEA and the rapid expansion of a new Kellogg's branded noodles business. Our work paid off in strong growth. On Slide 17, you can see we entered 2020 in a much stronger position than last year. Our portfolio is more focused on our best categories and our most differentiated brands. We're executing much better and leveraging enhanced capabilities. We've accelerated our consumption overall, giving us better momentum than we've had in a long time. We've made some important investments and moves within our supply chain, adding capacity in places where we've been constrained, from innovation like Cheez-It Snap'd, to on-the-go pack formats like Pringles Snack Stacks. In e-commerce, we continue to see strong growth in the 20% to 30% range, still only about 3% of our sales. We have invested in our digital capabilities, building on our brand's inherent advantage. And we're poised to make incremental brand-building investments as we revitalize additional elements of our portfolio and even extend a growing brand into a different area of the store. As you can see on Slide 18, Kellogg Company continues to pay a strong dividend to shareowners. This year's June quarterly dividend will be the 382nd dividend that Kellogg has paid to owners of common stock since 1925. The annual dividend for fiscal year 2020 will be $2.28, $0.02 higher than fiscal year 2019. Our dividend yield well exceeds the peer group average and continues Kellogg's long history of outperformance on this investment metric. As we turn to Slide 19, and as you heard earlier, our heart and soul strategy continues to be a unique and defining part of who we are and how we will continue to grow as a company. The rich legacy of our founder, W.K. Kellogg, who was truly ahead of his time as a conservationist, philanthropist and wellbeing visionary, guides us still today. As we continue Kellogg Company's 110-plus year journey, we're fulfilling our purpose of nourishing families so they can flourish and thrive by nourishing with our foods, feeding people in need and nurturing our planet, all while living our founder's values. More than 820 million people face a future of food insecurity brought on by our growing population, climate vulnerability and malnutrition. According to the Global FoodBanking Network, this number is expected to double due to the coronavirus pandemic. As a leading global food company and a company with a heart and soul, we must do even more to address the urgent and interrelated issues of food security, climate resiliency and wellbeing for people, communities and the planet. Our consumers and customers expect it of us and we demand it of ourselves. We've been actively working to help solve these issues for more than a century. Most recently, we delivered significant value for people, communities and the planet. That's why, in 2019, we announced our next-generation Kellogg's Better Days commitments to help end hunger and create better days for 3 billion people by the end of 2030, aligned with the UN Sustainable Development Goals 2030 target, and we're making good progress. As you can see on Slide 20, we're proud of our many efforts and have been recognized by numerous reputable organizations. Most recently, we've been recognized by Fortune as one of the world's most admired companies and by Newsweek as one of America's most responsible companies. Ranked #24 out of 300, we were the only company to receive a perfect social score for our work in philanthropy, human rights, diversity and inclusion and health and safety. Inclusion on these list validates consumer perception of our reputation and our ongoing efforts to deploy for growth, inclusive of our commitment to providing better days through our heart and soul initiatives. In summary, on Slide 21, we are making great progress against our strategy. In light of the ongoing COVID-19 pandemic, our most immediate priorities are to continue to ensure the health and safety of our employees, to make safe, delicious food that people need especially now and providing much needed support to the communities where we live and work. We still have work to do on the business, but we're doing exactly what we said we would do, and the results have come in as we said they would. Our portfolio has been reshaped for growth, and Deploy for Growth has us winning again in the marketplace. We are focused on balanced financial delivery, the kind that can result in consistent, dependable growth year in and year out. And as always, we are committed to our legacy as a company with a heart and soul. Turning to Slide 22. I now invite you to submit questions through the meeting portal. I'm joined by Kris Bahner, Senior Vice President, Global Corporate Affairs, who will read your questions aloud. Kris, will you please read our first question?

Steve, the Carpenter Union pension funds with combined assets of $70 billion have a collective ownership position of 166,000 shares of Kellogg common stock. Unlike most institutional investors, we support the classified Board structure because we believe it supports a long-term strategic perspective at the Board and management level. A classified Board and a majority vote standard represent a strong foundation of a solid governance structure. Could you speak to how the forthcoming declassification of the Board will enhance the Board and management's ability to take a long-term strategic view?

Well, thank you for the question. As I said in the prepared remarks, we think it's very, very important to listen to all of our shareowners. So I appreciate the comments, and I appreciate the question. As we've said in the past, I think our Board operates at a very effective level. We're blessed to have a very qualified Board, a very engaged Board. We just wrapped up our Board meetings over the course of the last 1.5 days. And I think they do an exceptional job at helping us navigate our strategy, helping us navigate the business in this most challenging time, and I think each and every day they prove that. So again, thank you for the comments, and we appreciate all input from our shareowners.

The next question. The recent growth in the size of passive mutual funds' corporate ownership interest in U.S. corporations has been dramatic. The Carpenter funds believe the growing concentration of ownership raises important public policy and governance issues. Currently, BlackRock holds 7.9%, and Vanguard holds 6% of the company's outstanding shares. Does the Board see this growing ownership concentration as a positive or negative development in regards to long-term corporate planning and performance?

We value all shareowners equally, and we work each and every day to create shareowner value and overall stakeholder value. And I think as you've heard in the presentation that I just gave, we take that responsibility incredibly seriously. And we will work hard each and every day for every one of our shareowners.

Steve, the next few questions relate to the COVID-19 pandemic. How many employees have gotten COVID-19?

I don't have the absolute up-to-date number of the number of employees. It's been quite small relative to the population, which we're very pleased about. And we think that is indicative of the way that we have handled the pandemic, as I mentioned, in my prepared remarks, taking early action around things like working from home, travel restrictions, meeting restrictions, social distancing. Our heroes show up each and every day to our factories, keeping our bakeries and our plants running day in and day out, practicing great social distancing techniques, temperature checks, all sorts of PPE, safety being put in place. And so we've kept the infection rate quite low and are operating at a very high level, and I give our supply chain leadership the strongest of kudos because they're doing it because it's the right thing to do. They care deeply about the safety of our employees and take seriously the responsibility of what we do each and every day to provide the world with foods that they love.

This is a multipart question. Is everyone working at Kellogg? Are we paying all of our employees and giving them health care benefits?

The answer to that is yes. We have the privileged position of being in the food business, where it's much needed right now and our businesses around the world have been declared essential businesses. So not everybody is working in the same way. So most office workers are working from home, if not all, office workers are working from home very effectively. And as I just mentioned, our heroes are showing up each and every day in the plants to keep them running. And so we like to say here at Kellogg, it's all hands on deck, working as hard as we possibly can to do the best that we possibly can.

Are employees provided masks and gloves?

If they're in the plants, the answer to that is yes.

Does COVID-19 present any new opportunities for Kellogg?

Well, again, we have 3 priorities as it comes to COVID-19. Keeping our people safe, that is first and foremost. Delivering food to our customers and consumers in this time of great need, so I guess you could say that represents an opportunity and one that we take incredibly seriously to make sure that we can do that to provide the food that people need in this time of incredible need. And so yes, our opportunity is to serve our consumers and customers in the best way that we possibly can.

The next question is from [ Kevin Chua ]. He says, "I'm a shareholder in Kellogg and here to ask a question as an affiliate of ShareAction, a responsible investment charity based in the U.K. With rising levels of obesity in the world, it's important that businesses create healthier products and adopt responsible marketing practices. With sugar taxes being present in more countries than carbon taxes, leading companies have an opportunity to stay ahead of further regulation while capitalizing on changing consumer preferences towards healthier products. It's encouraging to see Kellogg's commitment to nutrition and its efforts to cut sugar in its breakfast cereals. At the same time, a recent report from the Access to Nutrition Initiative, in which they assessed the nutritional quality of packaged products, showed only 24% of Kellogg's products in the U.K. could be considered healthy and only 9% are healthy enough to be marketed to children. So in this context, I wanted to ask how is Kellogg planning to increase the healthiness of its products and capitalize on the financial opportunities that come from selling healthier foods."

Well, thank you for the question, and thank you for the acknowledgment that the company has made great progress in our portfolio. We'll continue to commit ourselves to making that type of progress, while at the same time, we provide choice to customers and make sure that we're providing products that people want to eat, that they delight in eating. So it's a balance. It's providing consumers with choice while also recognizing that many consumers more and more are into health and wellness and are looking for products with clean labels, even all the way to organic. And so we'll continue to work hard to build the type of portfolio for the future because it's right from a commercial standpoint and it's right to give people that choice.

Steve, speaking of healthier products, what is your current position on removing artificial colors from all your cereals, such as Froot Loops and Apple Jacks?

We have made tremendous progress in removing artificial ingredients from all of our products, including our ready-to-eat cereal products. Where we will not make a compromise is around taste and enjoyment. And so to the extent that we can continue to make progress and delight consumers with noncompromising foods, that's our north star.

Steve, what percentage of employees are working from home during this time?

Virtually, all of our office-based employees are working from home-based environments and not office. Our plant workers, as I mentioned, are working from our manufacturing facilities. Our distribution people are working from our distribution facility locations, again, operating in a very safe way in following all of our protocols. But from an office standpoint, they're working from home.

Next question. If Snacks are growing, what is falling since overall growth isn't that high?