Kellanova (K) Earnings Call Transcript & Summary

All right. Welcome back. For those in the room, I hope you enjoyed that rather elongated lunch. So thanks for your patience. I hope you enjoyed the food. I think the chicken waffles were clearly with the side of Pringles, Sour Cream and Onion, the real hot one there. So thanks for hanging with us. I'm going to start this afternoon with an overview of the Kellanova business and explain why this is such a compelling investment opportunity, including introducing our refreshed strategy and financial targets. Then each of our 4 region presidents will discuss how their respective businesses are entering a new era of growth and margin expansion and how their strategies roll up into our overall company strategy. Next, Amit will come up and explain our financial outlook, both for 2024 and beyond. We'll hear more about our Better Days promise. Then, I'll come back and share final remarks before we open up for your questions. So let's get started with how an already strong company is about to get even stronger. So what is Kellanova? We are a set of businesses you may be familiar with. I know you are familiar with, but whose growth record and prospects have been somewhat obscured from view. We're a $13 billion company with good margins and cash flow. We participate in growing categories with iconic differentiated and beloved brands. We're also a new company. One with a new vision: to be the world's best-performing snacks-led powerhouse, unleashing the full potential of our differentiated brands and our passionate people. And we're an improved company with a growth mindset, a refreshed strategy and more ambitious financial expectations. This slide shows what we mean when we say Kellanova is a global snacks-led powerhouse. More than 80% of our sales come from snacks or emerging markets. This means that the vast majority of our portfolio participates in categories and markets that have led and will continue to lead overall packaged food growth. We compete in these categories and markets with leading shares and brands that are highly differentiated. The 5 brands shown on this slide account for more than half of our sales and have an impressive track record of growth. And Kellanova is truly a global company. In fact, our business outside the U.S. and Canada account for half of our net sales. In these international markets, we benefit from long-standing presence, experienced management teams, local supply chains and very strong routes to market to go along with our powerful portfolio of brands. And Kellanova has a track record of growth that fits a global snacks-led powerhouse. This slide shows estimated growth in recent years for Kellanova, excluding W.K. Kellogg Co. Not only has Kellanova shown consistent growth, but it has grown every bit as much as our snacking-oriented peers. And these snacking-oriented peers, by the way, generally fetch the highest valuation multiples in our peer group. So here's why we believe Kellanova is such an extremely compelling investment opportunity. First, we're building on what is already a strong base, what is already a track record of growth and applying to it a greater focus and a newly refreshed strategy. We now make our enviable portfolio even more growth-oriented, directing resources to the biggest growth elements of our portfolio. We have targets and plans in place to leverage what is inherently a high return on invested capital business and strive to deliver better profit margins. We anticipate this will drive faster growth in net sales and profit, faster than Kellogg Company, faster than our peer group. And we're doing it all in a way that is sustainable and dependable. And as I said, this is all about a strong company getting stronger. Please take a look at this opening video. [Presentation]

So this is the energy we are bringing into this new era. And along with this energy, we have a sharpened strategy to guide us. Recall that since 2018, our Deploy for Growth strategy has served us well as Kellogg Company. It drove key decisions and actions, restored our top-line growth and led to balanced financial delivery. Building on elements of that strategy that have worked well and are still very relevant, we have sharpened this strategy to focus more closely on what will drive Kellanova's business and what can lift our financial performance to an even higher level. We call this strategy Differentiate, Drive and Deliver. It pushes us to pursue differentiation in everything we do, from prioritizing resources behind our most differentiated brands today, to creating more differentiation for other promising brands in our portfolio. It means differentiating our marketing, both in approach and content. It means differentiating our service to our customers, from data and insights to supplying their shelves. It drives us to continuous improvement to finding more efficient and effective ways of working and more impactful ways of winning. And it focuses us on delivering. Delivering on our commitments to our employees, our commitments to our suppliers, our customers and our communities. And to you, our investors. Let's take a closer look at each of the pillars of this sharpened strategy and why they give us confidence in a higher level of performance for Kellanova. One strategic pillar is drive our growth portfolio, which informs our where to play decisions. As we've discussed, Kellanova has a more growth-oriented portfolio to begin with, which has led to strong 9% compound annual growth over the past 3 years. Snacks represent 60% of our business, so our growth will continue to be snacks-led. All of our Noodles and Other business and half of our international cereal businesses are in emerging markets with outstanding growth. That's another 20% of our portfolio. So we have a growth portfolio, and we plan to drive it further. And here's how we plan to do that. First, just look at the advantaged categories in which we compete. The first 3 are snacking categories, which, as you know, have consistently outpaced overall grocery in recent years, supported by a global consumer trend toward more snacking more of the time. Instant noodles is a category we play in through our partnership in Africa. It is a culturally relevant, affordable category that offers nutrition, versatility across occasions and opportunities for innovation on flavors, forms and packages. We play in frozen breakfast in Canada -- in the U.S., Canada and Mexico through our Eggo brand of waffles, pancakes and french toast. This is a category that grows steadily and reliably. The plant-based foods category, while currently consolidating after a couple of years of explosive growth and proliferation, has strong growth prospects, propelled by consumers' demand for wellness and for environmental sustainability. And while most of you track the cereal category in developed markets like Western Europe, where it is a century-old category with extremely high penetration, half of Kellanova cereal sales are in emerging markets, where the category's distribution and per-capita consumption remains very much on the rise. All of these are attractive growing categories with good economics and a responsiveness to what we do best, that's innovation and brand building. Within these attractive categories, we compete with some of the most differentiated brands in the market. Let's face it. There is nothing like a Pringles Crisps or a Cheez-It. Similarly, Pop Tarts and Eggo, our next billion-dollar brands, have long held on to their unique positioning. Rice Krispies Treats are also highly differentiated and have grown consistently for years. These 5 brands account for more than half of Kellanova's net sales. And because of their differentiation, category share and track record of growth, they are the brands behind which we invest the majority of our brand and capital investment. There is even a global opportunity for these brands. Pringles, obviously, is already very global. Cheez-It is the #1 crackers brand in the U.S. and has successfully launched into Canada, Brazil and most recently, Mexico. There's obvious opportunity to expand elsewhere. Pop-Tarts and Rice Krispies Treats are already in markets outside of the U.S., including the U.K., Australia and Mexico, but they have runway for more investment in growth in those markets and many more markets. And not even on this slide is the Kellogg's master brand. a very powerful brand that has particular use and strength in emerging markets. Kellanova will be shifting more of its investments, investments in resources, brand building and capital, behind these differentiated, growing and margin-accretive brands. That's driving a growth portfolio. Let's take a closer look at this, starting with our largest brand, Pringles. This chart shows what we've been able to do with this brand. When we acquired Pringles back in 2012, it generated about $1.5 billion in net sales. We returned it to growth modestly at first, and then accelerated it during the 2017 to 2019 period on the strength of more effective innovation and brand building, new pack formats and expanded capacity internationally. Then we saw a step change in growth over the last 4 years. And yet, there is still plenty of runway in this brand. It still has relatively small shares around the world. 3.5% in the U.S. and 4% in Canada. In Europe, Pringles share ranges from 6% in Spain to 12% in Germany. It's got a 1% share in Mexico and 5% share in Brazil. In Asia, only in Korea and Saudi Arabia does Pringles have a share in the high teens. Everywhere else, it's still in the single digits. In fact, where it took the last decade to add $1 billion of net sales, we believe and are confident we will add the next billion within 5 years, which would make this a $4 billion brand for us. How will we do it? We'll continue to execute world-class marketing behind this world-class equity. The impact in ROI of programs like our flavor-stacking campaigns and our promotions around gaming have been tremendous. And these activations give you an idea of what is possible for this brand. We'll continue to launch new flavors, new textures and new ingredients, all with great taste and a local bends. Pringles still under-indexes on single-serve and multi-packs, whose demand has consistently outpaced our supply. So we'll keep adding capacity for these pack formats. We'll continue to leverage effective route-to-market capabilities to expand distribution both geographically and by channel. For instance, we have an opportunity to meaningfully increase our penetration of high-frequency stores, such as convenience stores in developed markets and mom-and-pop shops in emerging markets. And to facilitate this growth, we are investing in capacity for this high return on capital invested brand. I mentioned small pack and multipack capacity. But we're also adding production lines and even new greenfield sites in Latin America and in Asia. Such is our tremendous confidence in this brand. Now let's talk about Cheez-It. We all know it as a very powerful brand in the U.S., and there has been so much growth potential in this market that we have always focused our investment right here in the U.S. until recently. We launched the brand with great success in Canada a couple of years ago. We tested it and are expanding the brand in Brazil. And this year, we launched in Mexico. It's a differentiated brand with real cheese and real attitude. And new platforms such as Snap'd give us that much more flexibility to find the right food and pack format for international markets. So while we expect to sustain Cheez-It's growth in the U.S., its international expansion is another leg to its growth story. Moving on to portable wholesome snacks. We lead with 2 of yet, again, the most differentiated brands in the category, Pop-Tarts and Rice Krispies Treats. Now think about what we can do as we put more resources behind these advantaged brands in our international markets. And right behind these brands are other strong brands with excellent prospects like RXBAR, Nutri-Grain and Special K. While our growth will be led by Snacks, the rest of our portfolio will also contribute to our scale and growth. International cereal will grow led by emerging markets, which represent just over half of our cereal sales. Our cereal sales in emerging markets have been growing at a mid-single-digit rate in recent years, and we are confident that we will continue to grow. And in developed markets like Europe and Australia, our goal in the highly penetrated cereal category is to build on our leading share positions. And in frozen food, we compete with 2 exceptional brands. Eggo leads the frozen from the griddle category and has a track record of steady growth. And we have the marketing and innovation plans to continue to grow it. Morningstar Farms is our plant-based brand with among the highest penetration and share in the veg vegan category. As this category consolidates after a period of outsized growth and substantial new entrants, it is the leading brand, and its simple label that stands -- its simple label stands to benefit the most. I'll point out another area of focus for driving our growth portfolio, and that's emerging markets. Emerging markets are where population growth and rising disposable incomes will continue to drive strong growth in packaged foods. We are well positioned in these markets with long-standing operations, very experienced local management teams and beloved brands that play across occasions, channels and price points and can be adapted to local cultures and tastes. To give us further advantages in these markets, we have invested in local manufacturing in several markets and have invested in route-to-market capabilities. And look at our track record shown on this slide, we have consistently delivered organic growth in net sales that is in the high single digits or well into the double digits. And by continuing to build scale in these markets, we believe we will sustain momentum and add to profitability for many years to come. So clearly, our portfolio is geared toward growth and our strategy is geared towards driving that growth. The next couple of pillars of our differentiate, drive and deliver strategy are aimed at how to win. Everything starts for us with delighting our consumers. That's what grows our categories and that's what grows our brands. And it's the primary objective of our brand building, our innovation and our in-store execution. Our refreshed strategy continues to emphasize what has been a key difference maker for us in recent years, our shift to an occasions mindset with our commercial efforts. This is what has propelled us to expand successfully into single-serve and multi-pack formats. It has informed much of our advertising and it has led to many more on-the-go offerings. Small packs whether for single-serve occasions or for penetrating those high-frequency stores or for offering lower price points is an area in which we are still expanding. There is significant upside for our key brands just by catching up to the category in terms of percentage of sales coming from small packs for immediate consumption. This chart happens to show this opportunity for Pringles, but we have similar upside for our other brands as well. We also have under-indexed shares in multipacks whose growth has outpaced our capacity for that format. All of this will be a focus for Kellanova and we've already been investing in this capacity and in this capability. We will also continue to delight our consumers with innovation. Even in the past few years, while contending with supply chain disruptions, we sustained a strong pipeline of innovations. These went beyond new flavors and into new platforms like Cheez-It Snap'd and Cheez-It Puff'd. With supply disruptions finally receding, we can accelerate our innovation efforts. We will also continue to renovate our foods, reducing sugar or sodium content, for example, or simply revamping for an overall better experience. And we will continue to innovate in packaging, investing in more small pack, small pack format capabilities. We will work to remain at the forefront of our industry on leading marketing capabilities. Since 2019, we have shifted significantly from linear TV to digital media, aligning with our consumer shift in how they take in media. We raised our game on data and analytics a few years ago, leveraging our data to power insights and personalization of offers and messaging. We continue to refresh our data with first-party acquisition now at 47 million households. We are taking advantage of the data we collect to identify buying patterns and consumer affinities to better target our paid media. These actions are clearly paying off. We have driven a 30% uplift versus business as usual and our AI optimized creative is driving double-digit increases in our video completion rates. The next pillar has a striving to deliver what we call Perfect Service and Store. This involves ensuring that our products are available wherever the consumer is shopping. Small packs enable us to better penetrate those high-frequency stores, I've mentioned several times, the mom-and-pops and the convenience stores. As you can see from the chart on the left, we under-indexed in these channels in salty snacks, it clearly points to a real opportunity for us. Another rising channel continues to be for us, e-commerce. You can see from the chart on the right that our sales have been growing steadily and rapidly in this channel, with double-digit growth continuing through 2022 and into 2023. It is now up to more than 7% of our sales globally and our shares in this channel are often as high or better than in physical channels. There is a capability required here to win, and it is one that we have enhanced in recent years from data and analytics to digital shelf to pack formats. Following the spin-off of WK Kellogg Co, our commercial teams in North America can focus solely on snacks and frozen foods. This enables our insights and analytics team to go deeper into fewer categories, draw out actionable shopper insights and provide unmatched category and shelf guidance for our customers. We've also taken this opportunity to be more snacking led in how we're organized and in how we prioritize the capabilities that we want to strengthen, with investments in retail sales force, execution measurement and channel strategy. We've been equipping our sales people around the world with better tools and technology, enabling insights and productivity through data and analytics that put them ahead of the competition. This better fits the new Kellanova, more impact throughout channels and outlets that are key to snacking led growth and driven by more front-of-store presence, more displays and more in-store service. We'll also continue to make our supply chain more agile, flexible and efficient. Even amidst the most difficult supply environment in memory, we continue to advance our Kellogg Work system, now Kellanova Work Systems, an operating model that is defined standards, improved identification and mitigation of losses and built up our overall organizational capability. Now we're combining that ever-improving operating model with a substantial push into digitization. This includes everything from enhancing data and analytics to digitally connecting equipment and employees. It includes leveraging AI solutions to optimize our end-to-end planning processes. It includes partnering with technology companies to run simulations through a digital twin process that will help to optimize solutions. It also includes leveraging robotics and automating processes to simplify our operations everywhere. Chris Hood will go into some more detail in his section, but suffice it to say that we are making huge strides in this area. And the results are more productivity, better service and faster cash flow conversion. We are also investing our supply chain to support our volume growth. Just as our innovation and brand building is more heavily behind our advantage brands, so is the growth portion of our capital investments, Pringles, Cheez-It, Pop-Tarts and Rice Krispies Treats have grown rapidly enough in recent years that we are now adding capacity behind these high ROIC brands. We are also investing in capabilities. In Europe, we are investing behind capacity and capability to expand our environmentally friendly paper can for Pringles. And in the U.S. and around the world, we are investing in capacity and capabilities around small pack and multipack formats whose demand has consistently reached our expanding capacity. Expanding margins is so important to us that our differentiate, drive and deliver strategy calls it out specifically as its own pillar. A few of the key drivers are shown on this slide, and Amit will provide you with more detail in a moment. And as you listen to our region's presentations today, you will hear how central this profitability improvement is to our overall strategy. We have plans to expand operating margins in all 4 regions and the total company in the next few years. The final pillar of our strategy is our better days promise. This is more than a comprehensive ESG program. It is a manifestation of our founder's values and it is part of our DNA. As such, it has always been recognized as a strength of the Kellogg Company and it will continue to be so at Kellanova. Our targets have been refreshed for Kellanova. And in the spirit of differentiate, drive and deliver, we have increased these targets. It is also worth pointing out that our consumers and customers see the value in our good work in this area. So you will see more commercial activity tying purpose and social and environmental action to our brands. Chris will discuss this in more detail a bit later. All of these pillars work together to produce a financial algorithm that is higher than we've targeted in the past, yet one we believe is achievable on a consistent basis. Amit will walk you through the algorithm a bit later. I'll just touch on some of the reasons why we are confident in this higher growth outlook. One is that these Kellanova businesses have already been delivering growth performance similar to this. Two is that our portfolio is so much more oriented toward growth today with 80% of our net sales coming from the combination of snacks brands and emerging markets. Three is that right away, Kellanova's mix of business is more profitable than that of total Kellogg providing more favorable economics right out of the gate for us, and we have plans to improve our margins beyond this. And finally, our durable cash flow and solid balance sheet give us the flexibility to pursue higher return investments, return cash to share owners or even pursue value-enhancing M&A. This algorithm should outpace our peer group and we are aiming for consistent dependable delivery of these financial results. Our objective is superior, consistent returns for share owners, and we will continue to be incentivized to deliver exactly that. Of course, all of this is powered by the competitive advantage that is our organization of talent -- talented dedicated people. This slide shows my direct reports who comprise our Executive Committee. They provide continuity as there are no changes to this leadership team other than John Min being promoted internally to Chief Legal Officer, succeeding Gary Pilnick. This is an exceptionally experienced leadership team and it is a diverse leadership team. It's the best leadership team I have ever had the privilege of working with. They have all been architects and change agents in the transformation of our company during the last several years. Simply put, they are the right people to launch Kellanova into what is a bold new era. Meanwhile, we've refreshed our strategic HR priorities for Kellanova to recruit, retain and develop the best people in the industry and to create the kind of culture that will propel Kellanova into the next era of very exciting growth. This differentiate, drive and deliver strategy, sharpened to better fit the new Kellanova company is driving the plans and actions being taken by all of our regions and the financial outlook that we strongly believe will produce top-tier financial returns. So let's now hear how each region will put this strategy into action. We'll start with Chris Hood in Kellanova North America. So if you could roll that Kellanova North America video right now, please. [Presentation]

All right. Thanks, Steve, and hi, everybody. It's great to have the opportunity to be back with all of you on such an exciting occasion. My name is Chris Hood. I've been with the company for 11 years. Prior to that, I led the Pringles business at Procter & Gamble, and I was 19 years at P&G. So you might say I've been associated somehow with that beautiful brand for the last 20 years. It's been a great journey. Going forward, I will be leading Kellanova's North America region. And I'm really excited to talk to you today about unleashing the potential of Kellanova in North America. And my goal today is to give you a sense for how Kellanova North America is a growth portfolio with the strategy perfectly aligned with the differentiated drive and deliver strategy that Steve just laid out and a financial outlook that points to growing net sales in the low to mid-single digits on an organic basis over time and operating profit at a mid-single-digit rate on a currency-neutral and adjusted basis over time. And we start really from an excellent place with a business that's already performing in line with that long-term algorithm on a 3-year historical CAGR, driven by the strength of our brand portfolio. So let's talk about why we are confident and excited about our future. The Kellanova North American portfolio is now fully oriented toward growth. Steve mentioned that for the total company snacks are 60% of sales and Kellanova North America snacks are more than 80% of our sales. On the left side of the slide, you see the categories that represents the Kellanova North America business, as measured by the last 52 weeks of retail sales. We operate in 5 very attractive categories with crackers being the largest 36% of total sales with brands like Cheez-It and Club Crackers. The Salty category is our Pringles brand, which represents 16% of sales. Portable wholesome snacks is a category in which Kellanova is the share leader with iconic brands like Pop-Tarts, Rice Krispies Treats, Nutri-Grain and RXBAR and frozen breakfast is the nearly $1 billion Eggo brand. Veg/vegan represents the MorningStar Farms brand, which remains a share leader in the frozen veg/vegan category. On the right-hand side of the slide, you see the net sales and operating profit growth that the Kellanova North American business has delivered over the past 3 years, excluding WK Kellogg Co. This performance benchmarks in line or better than many of our snacking competitors' North America businesses and it should provide long-term confidence in our long-term targets. Post-spin, Kellanova North America is immediately more profitable due to product mix, reflecting the strong structural economics and advantaged assets in our portfolio. So let's talk about how we plan to drive continued low single-digit to mid-single-digit sales growth on this more profitable structure. We're operating in attractive categories. On the left side of the slide, you see the 2019 to 2022 compounded growth rates for the categories where we compete, each with a strong performance behind secular growth trends. And on the right-hand side of the slide, you see the differentiated brands in the North American Kellanova portfolio, $2 billion brands in Cheez-It and Pringles, 2 brands in Eggo and Pop-Tarts, which are approaching $1 billion in sales and Rice Krispies Treats and MorningStar Farms each approaching $0.5 billion in sales. These brands define the categories in which they compete, yet all continue to have significant runway for growth behind further household penetration, extending into new occasions, through packaging formats and food innovation. And the refreshed Kellanova strategy shared earlier by Steve fits perfectly with what we're trying to do to continue the profitable growth of Kellanova North America. The crackers and salty categories are anchored by Cheez-It and Pringles with emerging stars and Club and townhouse. As previously mentioned, these are very attractive categories and you can see that in the upper right-hand side of the slide with 8%, 12% CAGR growth rates. Our portfolio has consistently grown ahead of the category with strong demand for core products, high-return brand-building investments and expansion of occasion-based packaging formats. And we see even more runway for growth building on previously strong performance. We're making investments to expand our small-format offerings, which serve as incremental occasions and we'll continue to create breakthrough marketing all as part of a virtuous cycle of growing volumes and net sales, expanding our margins and reinvesting back into our brands. Kellanova is the share leader in portable wholesome snacks with category-defining brands such as Pop-Tarts, Rice Krispies Treats, RXBAR, Nutri-Grain and Special K. And the overall category performance has grown mid-single digits with rapid innovation, lots of new entrants continuously entering and exiting, and we've grown in line with the category during this period. As we look to the future, again, there's significant runway for growth in this category. The size and scale of brands like Pop-Tarts and Rice Krispies Treats allow for expansion of food formats and packaging to grow our share of occasions while we look to amplify nutritional credentials on Nutri-Grain and Special K. And RXBAR has a distinct No B.S. message, which we intend to bring further to life on the core bar and through relevant and incremental food innovation like RXAM, which stays true to the No B.S. brand identity, but extends the brand to a broader audience through a new food experience. Our frozen foods portfolio contains the iconic Eggo brand, which is the share leader in from the griddle breakfast offerings. It also contains Morningstar Farms, one of the founding members of the category and a leader in frozen plant-based meat alternatives. These categories have seen rapid development over the past 3 years. These categories are driven by relevant and impactful innovation that doesn't compromise on taste, and that's what we are committed to doing behind innovation and renovation on core food forms, new highly incremental offerings to grow the category and distinctive packaging to stand out and reach new occasions and consumers as well as offering convenience benefits like resealable freezer packaging. We'll continue to fuel these brands with impactful consumer messaging and master brand campaigns, which leverage the strength of the equity. And we've improved supply and service, which allow us to regain lost distribution and expand into areas where constraints have impacted our end-market growth over the past couple of years. Previously, I spoke about the significant opportunities we see in expanding our brands into new occasions and this slide illustrates the occasion-based formats, which we're investing in behind Pringles and Cheez-it. Multipacks and variety packs support consumption occasions both at home and on the go and are typically purchased in traditional retail and club outlets. These offerings are highly incremental to our core pantry offerings and have been a disproportionate source of growth for the category and for our brands. The grab-and-go and single-serve offerings are intended for immediate consumption and provide for a different vector of growth through nontraditional channels, convenience stores and front-end grocery environments. Expansion of these formats via packaging capability investments is a significant source of sales growth and household penetration expansion for our snacking brands now and in the future. Innovative Foods & Packaging is also a core tenet of our growth strategy. Delivering foods that amplify the core credentials of our highly differentiated brands allows us to expand the breadth of the brand, while staying true to the underlying equity. And we're able to drive incrementality with exciting new foods and packaging that bring consumers into the brands and deepen the connection with already loyal consumers. And these innovations drive premiumization of the brands and grow the total category, which excites our customers as well. Last but not least, creating relevant commercial activations enables our brands to reach new consumers and occasions in culturally relevant moments, which further builds the relevance of the brands like the Eggo Stranger Things execution, you see picture here. It takes world-class marketing to build world-class brands. And for the Kellanova business, that means breakthrough campaigns funded sufficiently to make an impact. Supporting our brand building, we've developed data-driven and agile measurement, which allows us to dynamically test and adapt our media plans and our messaging. These analytical capabilities, coupled with our outstanding brands delivers a strong near in return on investment behind our brand building and supports building long-term brand equity. Our analytics capabilities extend beyond brand building and in-store capabilities in support of an outstanding retail sales force where we have invested as part of establishing Kellanova. Supporting our team, we're developing and deploying advanced capabilities, enabling our reps to scan the shelf and immediately identify compliance opportunities against shelving plans and fix them on the spot. In another example, we're developing augmented reality tools to visually model the in-store experience to enable a database conversation with a store manager about hotspots in the store for productive off-shelf merchandising. We've also brought analytics to measuring and improving execution. One such instances are dynamic routing capabilities, which directs our retail sales reps to the optimal routes daily, directing them to the biggest opportunities to improve on-shelf availability and in-stock levels with the shortest windshield time. We've seen strong returns on this investment and we view it as best-in-class. Another area of capability that we've developed, which is yielding results is in e-commerce. Last year, almost 1/3 of our sales growth was enabled by e-commerce with the channel totaling 11% of total sales in 2022 and even higher in the first half of this year. These investments and capabilities have allowed us to move to an online share advantage in 4 out of 5 categories and strong share growth over the past 2 years. These gains were enabled by a choice to transform our omni-commerce organization and capabilities starting in 2019 and it's yielded excellent results. The Kellanova supply chain is a critical part of continuing our growth trajectory. We continuously focus on ensuring we have the capacity to grow our brands and reliably service our customers. We've unlocked capacity in recent years with strong productivity, new lines and portfolio optimization efforts. And a great example of this is our Cheez-it plant in North Carolina, picture here, where over the past several years, we've made significant investments in new Cheez-it capacity across all pack formats and also in robot-enabled automation capability for small packs. Cary is also our pilot plant for our smart factory program, which is driving performance visibility and faster line level decision-making and practices that are qualified here are then deployed across our broader manufacturing network. In addition, we continue to invest in capabilities within our network. We focused heavily on optimizing the logistics network, particularly as part of delivering the spin-off. We tested over 80 scenarios and landed on what we believe is the optimal footprint for our business today and for the growth we expect to deliver in the future. Kellanova Work Systems or KWS is the foundation of our supply chain operating model, and it's driving autonomous maintenance, weakening the evolution of procurement, planning and logistics and supporting the development of high-performing teams to drive engagement. And as referenced on the previous slide, digitization and automation is a key feature of our manufacturing strategy. We are investing in our digital journey to leverage our data analytics and interconnectivity through initiatives such as our Smart Factory program, where we've digitized information and equipment and enabled employees at the line level with tablet technology. All these initiatives provide real-time information that facilitates better visibility into line and plant level performance and faster decision-making. In short, we're investing behind a more agile, flexible, digitally powered world-class supply chain. The benefits of these efforts span quality, safety, natural resource conservation and of course, efficiencies. They've created a more reliable and resilient network and also accelerate our margin initiatives. Revenue growth management has been at the forefront of the strategy in the past few years due to the significant in cost inflation that we've seen -- input cost inflation that we've experienced. And going forward, we are focused on delivering benefit-led pricing, which adds new benefits to our foods and packaging that consumers are willing to pay for, promotional optimization, which seeks to make our promotional spending more impactful and leveraging our packaging size strategy to hit critical price points, especially for lower income consumers between revenue growth management, supply chain efficiencies and a mix shift towards our advantaged brands and overall operating leverage, we are confident in our ability to expand profit margins in Kellanova North America. So in summary, we have confidence in the future of Kellanova North America. Our business has performed very well over the past 3 years, and we believe our future plan will sustain strong top line momentum on a more profitable platform. We play in very attractive categories, which have consistently grown over the last decade and we compete with an amazing portfolio of highly differentiated foods and brands, which respond very well to marketing and innovation. We have visibility to significant growth runway by doing what we do best, penetrating new occasions with new packs, generating consumer excitement behind new innovation and driving world-class marketing to create brand differentiation and consumer love. We continue to focus on building winning capabilities such as data-driven marketing, revenue growth management and a growth-oriented digitally enabled supply chain to support our growth goals. And we have an outstanding leadership team and employees in place to create this exciting future. All of this adds up to low to mid-single-digit growth in net sales and mid-single-digit operating profit growth that we believe is sustainable over time. So with that, I'll now turn the podium over to David Lawlor in Kellanova Europe. Please play the video. [Presentation]

Good afternoon, everybody. I'm David Lawlor, I'm based at our European headquarters in Dublin, which is in Ireland. And it's also where and from. It's also where I started my career in sales. I went on from sales in Ireland to work in setting up our Middle East business, our Turkey business, a Russian business, that a U.K. business, but recently, our European Cereal business and now I lead the region. It's great to be with you. And I'm excited to share with you how Kellanova Europe is aligned to the company's differentiated drive and deliver strategy. And our Kellanova Europe is committed to achieving our long-term algorithm, which is low single-digit organic net sales growth and mid-single-digit operating profit growth, a currency-neutral adjusted basis. Okay? Strategy and flight success is about smart choices. And our strategic choices push off from the new Kellanova strategy, as you can see here. And encouragingly, they are all in flight. Summarizes as growth portfolio being snacks led and serial enabled. Our ways of working are increasingly digitized both commercially and operationally. And that evolving pivot enables the creation of end-to-end value pools. That's sustained, as you can see the transformation, very precious customer engagement agenda all the while delivering indeed seeking the opportunities around our better days commitments. Now as a reminder, yes, let's look at who we are first and how we've been performing. Currently, just over half of our portfolio, 52% is in snacks and it's growing, as you can see, high single-digit CAGR, 8%. Cereal has also been growing, albeit low single digits, you can see it there at 2%. And our growth performance has been consistent, reliable, something we're very proud of. Our region has been growing for close on 6 years now, and we're doing so, as you can see, both top and bottom line, gives us enormous pride. Okay? So that's the heart -- what is at the heart of sustaining those 6 years of growth, it's Pringles enriching asset-rich portfolio. Pringles is such a unique differentiated and distinctive brand. And these are the key attributes of value creation, pretty much in any category. And not surprisingly, therefore, it's our growth engine. As you can see, our trajectory has been accelerating beyond mid-single digit most recently. What's more, it's region-wide growth with consistent double-digit growth in recent years in the U.K., Ireland, Continental Europe and Eastern Europe and driven by award-winning marketing combined with best-in-class in-store execution. And whilst our Pringles distribution has also been increasing impressively in recent times. We still see further opportunities for growth and expansion and are busy preparing the ground to pursue that untapped potential. With that robust performance means, we now have a sizable share in our key markets. So Kellanova question begs a strategy for us, can we push on even further? And the short answer to that is yes, as we can. You heard from Chris just now about the success of Cheez-it in the U.S., we see that as a big opportunity in our region. Steve alluded to it, and we are developing plans to make it our biggest new brand launch in recent times. We will, of course, bring you more specifics on that exciting opportunity and future engagements, but now it's an opportunity to get to double-digit share regionally in the salty category. Indeed, in some markets, we've been looking at Kellanova as a circa 15% share player in the salty category. That's a notable performance and consistent with our company vision as Steve outlined, of us being a best-performing snacks player. So differentiation is clearly a strength for us in snacks and that extends into our portable wholesome business also where our performance in our key markets of U.K., Italy, Ireland has been running at double digit. Our current run rates have kept up with these CAGRs and that signals to us sustained, untapped potential. And we have other distinctive U.S. snacks assets to explore for growth in the region, including our enthusiasm, RX. Distinctive brands are also much in evidence in our cereal portfolio in Europe, brands that enrich a total portfolio asset base. Our Cereal brands are loved by consumers across the region. These 6 brands that you see on this slide alone represents 60% of our Cereal sales, and they've been growing mid-single digit on average of late. We continue to lead the brand performance in the category, aided the top 20. Tresor/Krave is the #1 branded cereal in Continental Europe, raising Coco Pops, [indiscernible] brands and have grown volume share while holding value share, which is no small achievement to our recent inflationary cycle, and our brands have scale and the opportunity to further advance our and our customers' financials in this post-inflation cycle, that's something that we are going to be laser focused on and are actively planning for. Examples, as you can see on this slide, include common recipes, artwork, sku size simplification and a consumer-centric new cycle will very much drive our focus as we go forward. This focus agenda and its scale with our customers and our shoppers add fuel to our total portfolio of sailings and ambition. So if that's what our portfolio is going to look like in Europe, let me shift gears and now talk about how we are delighting and engaging with our consumers. We are focused on strengthening our relevancy, our presence and our availability, and there's a lot of growth to get after from that point of view. Singles formats deliver accretive economic return and our muscle and activation opportunity for us. Channel ready and specific formats also the global duty-free market, for example, is forecasted almost double by the end of the decade, and we have a portfolio and activation opportunity there, too, which we have begun to progress recently. Deliberate growth channel penetration is an area we've been progressing well, combined with our standards for upper-tier execution, all point with fertile landscape for growth and disproportionately so in our snacks portfolio [indiscernible] is also driven by the power of partnerships or scale, scale that I mentioned and reputation enable a compelling alliance agenda that can delight consumers across the region and create value for all. In Continental Europe, we've just cemented in alliance with the NBA. That's an alliance we intend to activate over multiple years in multiple markets. We have a long-standing Kellogg's Cúl Camps partnership with the GAA in Ireland, and we anticipate an equally compelling sports alliance in the U.K. as we go forward. Our multiple gaming partnerships in recent years in our snacks business have been a proven success, helping us drive penetration and share. And in serial relationships like the one you see here with Alpro advanced or and the categories, wellness credentials. An additional proof point where our ambition is being grounded is our elevated marketing performance. Chris also alluded to even going back 5 years, our marketing a step change for today's digitized consumers and shoppers. Our marketing has been externally recognized as best in class, and we have plans to keep stretching ourselves in that respect beyond '23. With clearer consumer understanding through data comes sharper tonality. And with that elevated activation effectiveness, this will continue beyond '24. Our ambition does not stop there because it's not just top line growth momentum we're unlocking. It's profitable top line growth momentum, digitization and the evolved ways of working at ripples for us internally, as you can see referenced on the right-hand graph, will help ensure our margins advance to this growth journey also. What's at the heart of this, partnerships, ambition and big questions, asking ourselves those bigger questions that elevate confidence in the returns from our capital and our operational planning. So whether it's new partners like Siemens or existing and evolving long-standing partnerships with companies like Sunoco or Kantar, we have the relationships, expertise and ambition to advance and evolve more profitably. And these aren't could do's, might do's, should do's. These are happening and in-flight as I stand here with you today, which is why, as you can see, we are confident in our strategy. We have the portfolio and the capabilities to continue to grow ourselves forward, creative snacks led growth with cereal providing the profit and scale to enable it. Margin expansion through operating leverage, mix shift through our most advantaged brands, categories, channels and markets, improve productivity and of course, revenue growth management. The result is a continuation of that tangible reliable growth, edging our way indeed after a decade of growth, generating that low single-digit net sales and mid-single-digit operating growth through time. So from Europe and with that, let me introduce Nicolas Amaya is going to tell you about Kellanova Latin America. [Presentation]

Excellent. Thank you, Dave. [Foreign Language], everyone. My name is Nicolas Amaya. I've been with the company 22 years, both in North America and Latin America. And currently, I lead the Latin American region. So just as we saw in North America and Europe, in Latin America, we also have an exciting agenda to continue to develop our business in the region, sustaining our accelerated growth momentum. This momentum should generate mid-single-digit organic net sales growth over time and a high single-digit operating profit growth over time on a currency-neutral and adjusted basis. So let me explain how. So without doubt, we see Latin America is an attractive region with immense potential for our business. It is a sizable region, not only because of its population of more than 640 million people, but also with big and growing food categories. While Latin America is known for its volatility over the past couple of decades, we've seen a region that has progressed economically with a growing middle class, increasing its purchasing power over a wide range of retail environments that continue to evolve and increase in sophistication. And we have already been capitalizing on this opportunity, sustaining accelerated growth, not only at a regional level, but across each of our 4 business units. Mexico and Brazil, our largest business units, which are 2 of the top 15 world economies and represent more than 60% of the region's economy. And our Central American Caribbean and Pacific region are organized as scalable commercial and operational clusters to serve our consumers and customers in a strong and efficient way. We have been also transforming the shape of our portfolio, moving from a serial debt business to a more balanced portfolio where snacks has become a bigger portion of our business. And while this transformation has been intentional, this hasn't come at the expense of our core portfolios. We have sustained accelerated growth across all our key categories. Our top and bottom line performance reflects the strategic direction taken combined with an unwavering executional focus from everyone in Latin America day in and day out. And while we have seen strong performance, we continue to stay focused on our long-term ambition setting 2020 of doubling the size of our business by 2030. By providing all the solutions to our consumers, increasing our availability for shoppers and customers all delivered through the strength of our brands, our capabilities, and our people. Aligned to the global strategic areas, our priorities reflect the choices made to drive towards this ambition. To drive our growth portfolio, we are focused on continuing to advance our snacks transformation, build scale in Brazil by maximizing its portfolio, expanding the cereal category throughout the region, all while leveraging our global and regional brands behind selective opportunities. On delighting our consumer focuses on driving innovation to capture new segments, occasions and retail opportunities while continuing to strengthen our brand engagement and superior data and analytics. On perfect service and store beyond all the point-of-sale work and collaboration with our customers, we're focused on driving growth in underdeveloped retail environments. And finally, to expand our margins, we're focused on efficiently aligning our supply chain to our portfolio and geographical priorities, while driving specific efficiency actions across our business. Now diving to some of these opportunities. On snacks, let's start with Pringles. It's the largest Kellanova brand in Latin America, and it has been growing at exceptional rates over the past few years, gaining share in our key markets, led by our commercial and innovation programs. This has also combined, from a combination of increasing distribution critical for this category while expanding production capacity to keep pace with demand. Moving forward, we remain focused on building the breadth and depth of our portfolio continuing to connect with our core consumer, leveraging the power of our brand, expanding our footprint with particular attention to high-frequency stores and continuing to build the right pack value to offer consumers for the different locations. Also to complement our Southeast snacks presence, we have launched Cheez-It in our core markets, Brazil and Mexico. While still early stages, we continue to build trial, awareness and distribution. Moving forward, we will focus on solidifying our launch, expanding our offerings across formats and retail environments while rolling this out across the rest of the region. We also continue to build our portable snacks portfolio. We have a solid presence and share in the Caribbean, Mexico and Central America. We're focused here on continuing to drive scale behind our core portfolio, expand the presence of our global brands like Pop-Tarts and Rice Krispies Treats while also evolving our portfolio into new relevant segments and formats, all this for expanding regionally into the rest of the markets. In cereal, we have a shared leadership in Latin America that continues to grow over time. We have a very strong portfolio of leading brands across key category segments, which have been strengthening and growing over time. Yet we have a headspace to continue to grow and develop this category. Our capital consumption continues to be much lower than developed cereal markets. We'll continue to expand cereal consumption into additional occasions, and we'll continue to build distribution across the different retail environments. Looking forward, our focus is to continue to build the relevancy of the category. This involves elevating functional benefits, strengthening our commercial brand programs and driving innovation, while continuing to offer affordable solutions that support our distribution expansion. We also have opportunities to continue to broaden our scale, leveraging the strength of our global portfolio. We have been introducing our frozen Eggo business across the region with very encouraging results. As part of our acquisition of the Parati business, we're leveraging some of the great seasonal offerings that we have like panettone, expanding our presence in key locations and geographies. We have also continued to expand our dairy partnerships across the region as also successfully done in Europe codeveloping cereal and yogurt branded solutions. As I have referenced across our categories, innovation is a key pillar of our growth strategy to ensure we continue to develop our business in current and new segments. We're continuing to evolve the depth of our portfolio through packaging innovation to ensure we drive the right affordable price pack architecture for the right occasion and retail environment. We're also driving food solutions for our key categories and brands into new relevant occasions, all supporting is our push into new technologies and capabilities. This creates differentiated solutions for our consumers. We have also been developing our capabilities in the digital and analytical space and we will continue to do so to support not only our consumer and shopper activation but also efficiencies across our end-to-end operations. Latin America has more than 4 million retail outlets. 70% of those are small, high-frequency stores, which are highly fragmented. While we continue to solidify our presence in big retail formats, we also need to officially reach these high-frequency stores through a combination of our own routes and a powerful partnership network. We're also seeing the rapid growth of different digital channels that have accelerated by the pandemic, and value-driven formats like cash and carry, discounters and clubs, where we need to continue to increase reach, our portfolio and activation. Our customer service focus is critical to winning the market. We are focused on ensuring that internally we are keeping up with our capacity involving and optimizing our logistic network, and external we will further develop collaborative models and tools to continuously optimize the joint operation with our customers. And finally we are focused on driving sustainable margin improvement. We will continue to excel in our RGM capabilities. We'll continue to make operation more efficient end-to-end. We will continue to drive towards a scale and efficient operation in Brazil, and we will have opportunities to optimize our portfolio and redesign our sourcing. All of this will drive margin expansion for us. So in summary, Latin America is and will continue to be an attractive region with immense potential for our business. We have been consistently driving and accelerating our growth across our region, and with our growth is sustainable. We have a big ambition with a clear set of choices to achieve this sustainable growth. Over time, this should translate into net sales at mid-single-digit growth and operating profit at high mid-single-digit growth. And now we'll hear from Shumit Kapoor about Kellanova EMEA, play the video. [Presentation]

Thank you, Nigel, and hello, everyone. My name is Shumit Kapoor, and I've been with Kellogg for the last 3 years. Prior to that, I worked with Proctor & Gamble, Nokia and Mars, predominantly across Asia Pacific and parts of time in Europe. I am from New Delhi, India, and I lead Kellanova for the Asia Pacific, Middle East and Africa businesses. The Kellanova differentiate drive and deliver strategy is already alive in EMEA. Kellanova EMEA is an important growth engine for this company with so much opportunity in the present and in the future. And we believe we have a clear path to high single digit NSV growth over time on an organic basis, and an operating profit on a currency-neutral and adjusted basis. Allow me to explain what that means. The population, the demographic dividend and the GDP are all indicators of the potential of Asia Pacific, Middle East and the Africa region. We have a route-to-market presence across our geographies with a broad presence across emerging markets. That route to market now allows us to expand their portfolios across these markets to meet the consumer needs across multiple price points. Our portfolio in EMEA is balanced across 3 growing categories, noodles and others, which is based in Africa as the largest, cereal and snacks are not far behind. On a 3-year CAGR basis, the region has shown consistent growth across all the categories. The low penetration for categories such as cereal and for brands like Pringles, provides significant opportunity over the years to come for us. Add to that, the possibility of expanding global snacking brands like Cheez-It, and we're looking at sustained upside potential. Our business is broad-based geographically as well as relatively diversified across Africa, Asia Pacific and the Middle East, North Africa and Turkey regions, where developed and emerging markets all being key contributors to our existing sales. At the same time, it's not just potential, the region has consistently delivered solid growth. As you can see from the slide, we have delivered double-digit growth in both net sales and operating profit since 2021. And that growth hasn't come from a particular category or geography. It has been broad-based. Now let's dive into some of the key choices we are making in EMEA, all aligned to our differentiated drive and deliver strategy that we've talked about. Looking forward, we expect to see growth across all our categories. At the same time, our portfolio will evolve with our snacks and noodles categories expected to grow at a faster pace. This will shift our portfolio towards these categories, as you can see on this slide. Now let's take a look at each category, starting with snacks and our bar house [ grind ] of Pringles. Pringles has been a star performer in the region over the past few years. growing double digits in recent years and gaining share. This growth has come from both developed as well as emerging markets. At the same time, the potential for the brand is immense, given its relatively low category shares and considerable distribution expansion opportunities that we have. We want to use the success of Pringles to expand our snacks business. Our strategy is simple. The first is to grow our core through expanding occasions, superior food and building a presence across price points. The second is to expand, expansion of the portfolio and geographic expansion. We'll bring our global winners like Cheez-It and launch it by leveraging our successful Pringles route to market in the region. At the same time, we will accelerate our investments in emerging markets through distribution expansion and increased investments in the brand. Our second focus category is the ready-to-eat cereal category. This category remains the cornerstone for the region. We have significant share and presence across our markets. We will continue to win through our portfolio and in-store execution capabilities. Our ready-to-eat cereal is based and focused on our better-for-you platform with the intent of having a portfolio across multiple price points, as you can see on the affordability pyramid. Our Africa joint venture is a competitive advantage for us through the scale that we have created in Nigeria. It allows us to further expand our portfolio, particularly snacks and cereal as a complement to our noodles position. We are also expanding our Kellogg noodles brand beyond the existing geographies and across Middle East, North Africa and Turkey. And now we pivot to our portfolio and how we delight consumers. So let me focus a little bit more on innovation. Our innovation strategy focuses on taste, superior food and caters to local taste and preferences. This strategy extends across all our categories that we compete in, ensuring that we're meeting the needs of consumers across different price points. We can talk to stuff like getting into pack sizes, that suit our emerging markets' route-to-market capabilities and distribution. Let's break this down into greater detail, starting with affordability. Our intent is to deliver superior food at the right price points and drive growth across all tiers of the affordability pyramid. We believe we have the distribution strength in our route to market to continuously expand our distribution presence, particularly in our emerging markets. At the same time, we continue to innovate our ways to engage with our consumers through the digital medium. To do so, we are upgrading our digital capabilities, and we're creating use cases that allow for more targeted consumer communications across the region. While winning with consumers remains our primary focus, we are also focused on being the preferred supplier of choice to our customers. And the starting point of that is to ensure product availability. We're investing in growth, and we're setting up a state-of-art Pringles manufacturing facility in EMEA to handle our strong volume growth. At the same time, we are digitizing our plants of planning and logistics platforms. We're investing in advanced analytics from being reactive to predictive for better planning purposes. And we are ensuring we are maintaining the high service levels that we have and optimizing our inventory levels. We continue to engage and focus on customer collaboration through our joint business planning, and we are strengthening our sourcing strategies and supplier partnerships to ensure business continuity, which then brings us to our abilities to actually execute in store with excellence. As our business grows, we continually recast our route to market to ensure superior sales fundamentals with relevant cost-to-serve capabilities in our distributor markets. Our objective is to drive growth across the channels in our retail environment, investing behind the winning channels market-by-market. The intent behind recasting our route to market is to expand our reach, and we are targeting adding upwards of 1 million distribution points across India, Africa and the Southeast of Asia. We aim to drive a high level of consistency in our in-store execution through the perfect store execution across channels. Our in-store tracking systems are now being deployed to more markets, allowing for better customer management and improved return on investment at our coverage of these stores. Similarly, we're collaborating with our customers to enable digital capabilities and allow for better and faster decision-making. Our integrated business planning process is coming to drive customer service and ensuring sales fundamentals and in-store execution. If we're able to deliver against these strategies of winning with our consumers and partnering with our customers, it has an immediate impact on our bottom line. As you can see, we are focusing on end-to-end productivity to expand our margins. Whether it's driving revenue growth management or building scale in emerging markets, we expect our initiatives to improve our profitability while growing scale. And so we're confident that we have the building blocks in place to maintain the strong momentum we have in AMEA. We start with a broad geographic presence in a region of population and economic growth. We add to that a balanced portfolio comprised of growing categories and strong brands. We invest in Pringles, even adding much needed capacity to lead our growth and leverage a competitively advantaged business to grow in Africa. We invest in digital capabilities and tools for greater efficiencies, adding to the margin expanding benefits of operating leverage, scale, productivity and revenue growth management. And the result should be the delivery of high single-digit organic growth in net sales and currency neutral adjusted operating profit in the years to come. And with that, I will turn the podium to our CFO, Amit Banati, to talk to you about our compelling financial plan.

Thanks, Shumit. Good afternoon, everyone. You've just heard how each of the regions will leverage our differentiated, drive and deliver strategy. Now I'm going to explain our raised financial outlook, which we believe can be delivered consistently. As Steve mentioned, we have several reasons to be confident in these long-term growth targets. Kellanova already has a track record of strong growth in sales and profit. This growth has been and will continue to be driven by a portfolio that is very much oriented towards growth categories and markets. From business mix alone, Kellanova starts out on day 1 with higher top line growth and higher profit margins, and margin improvement plans are in place in all of our regions, as you just heard. We also overcome any stranded margin almost immediately. Durable cash flows and a solid balance sheet give us the flexibility to invest in our business, pursue M&A and return cash to shareowners. I'll now walk through each of these items in a little bit more detail. As Steve mentioned, Kellanova already has a track record of growth, as you can see. In fact, our top line growth would have been comparable or better than snacking-focused companies in our peer group over the past 4 years. This is because of the growing categories we play in as well as the strength of the brands with which we compete. Not only has this led to strong net sales growth, but it also has led to consistent growth in operating profit. Though often difficult to see when it was embedded in the Kellanova Company, this business has been on a consistently upward trajectory for quite some time, both on net sales and operating profit. In other words, our financial algorithm builds on performance that we have already successfully achieved. Confidence in our ability to sustain above-average growth starts with Kellanova's growth-oriented portfolio. All the global categories we participate in have sustained above-average growth, both before the pandemic and during the past few years. When you add into the equation the strength of our brands in those categories and our mix of developed and emerging markets, you draw confidence in our outlook. This chart covers only projections for the next 3-year period, but gives an idea as to how we think about the long term as well. Snacks globally to generate mid-single-digit growth over time, and possibly a bit higher than that in the next few years given our momentum. This growth is supported by snacks category growth rates globally. And we've discussed Pringles runaway for growth around the world and the international potential of Cheez-It, Pop-Tarts and Rice Krispies Treats. Our noodles and other business in Africa and the Middle East generates nearly $1 billion of net sales and is growing rapidly as Shumit just discussed. We are extremely well positioned in Africa's largest market, Nigeria, with a partnership that includes the leading branded noodles player and the ultimate competitive moat, the largest packaged goods distributor in that country. Between category growth, the strength of our business and the opportunity to expand Kellogg's noodles outside of West Africa, noodles and other should be a double-digit grower. Our Frozen Foods business is principally in North America, where Eggo and it's strong [indiscernible] category have demonstrated consistent growth over the years and where Morningstar Farms is well positioned as a plant-based category consolidates and resumes growth. We see our Frozen Foods business growing at a low single-digit growth rate. We expect international cereal to grow at a low single-digit rate as well. Remember, half of our international cereal sales come from emerging markets, whose consistent mid-single-digit growth should more than make up for the stable nature of developed markets in Europe and Australia. Put it all together and you can see why we project mid-single-digit net sales growth for the total company. Now let's turn to margins. The minute we spin off W.K. Kellogg Company, our margins improve due to our remaining product mix. So right out of the gate, Kellanova is a more profitable company, and we will become even more profitable. Specifically, we have plans to improve our operating profit margin from a level to today, excluding estimates for W.K. Kellogg of just over 13%, up to 15% within the next few years. Each of our regions has planned to improve margins, as you just heard, while still incorporating rising investment in our brands with advertising and promotion rising faster than net sales growth. Some of the drivers of this margin expansion are shown on the slide. Top line growth in our business generates meaningful operating leverage, and that will be a key driver of our margin expansion. In addition, we are already taking action to mitigate the stranded margin impact of spinning off a portion of our net sales. As Steve mentioned earlier, we have taken a very proactive approach to eliminating as much stranded margin as we can. For instance, we made deliberate choices on talent placement into W.K. Kellogg Company and backfills in Kellanova. We have redesigned our Kellanova organization both in North America and in corporate. We've made changes to processes and contracts. We also have a transition services agreement for up to 2 years, covering a number of processes, which effectively neutralizes stranded margin. As you can see from the chart, we expect to improve margins right away in 2024. Another margin driver will be the mix shift towards our most advantaged brands, which you can see on the chart to the left. These are highly differentiated brands that account for a little more than half of our net sales. As they continue to outpace our portfolio, they will have a positive impact on our margins. The right-hand side of the chart shows another important margin driver, increasing our scale in emerging markets, which we just heard from Nigel and from Shumit. Our emerging markets have well outpaced our overall sales growth in recent years, and we believe they will continue to do so. This growth generates important scale, both within our manufacturing and distribution as well as on our overhead and brand investment. This slide shows 3 key emerging markets that for us are at different stages. Mexico has, through our roughly 7 decades of presence there, achieved scale, and its margins are comparable or even better to our developed markets. India, where we've been for a little over 3 decades, is approaching that of developed markets with room to expand further. And in Brazil, where we've been relatively small until recent years, we still have significant room for expansion and have made good headway in the past couple of years. And there are plenty of markets like Brazil, where our infrastructure is in place and where growing our sales will cover more of that infrastructure expense. Brand mix and emerging market scale will be bigger margin drivers for Kellanova. Productivity and revenue growth management will also be important for improving our margins. Our supply chain has an annual productivity target of 3.5% to 4% of cost of goods sold through our ongoing Kellanova integrated margin management program. Our track record is good in this area, and we expect to get back to that range as the bottlenecks and shortages of recent years received. Our KWS program has become not only an important driver of realizing this productivity, but it is also enabling our supply chain to advance the digital transformation that Steve discussed earlier, and that represents a next leg in our annual productivity effort. And we are constantly assessing opportunities to realign our supply networks, always ensuring that we are producing the right products on the optimal production lines in the optimal plants. Revenue growth management will also remain a margin driver. We invested in RGM capabilities back in 2017 all the way through 2019. Obviously, this was a critical capability over the past couple of years when input costs sored beyond what we could cover with productivity. And the chart shows how all regions were able to tap into this capability in order to keep up with this accelerating cost inflation. RGM is much more than just list price increases. It is a set of multiple levers. Price pack architecture can improve economics while also ensuring suitable formats or price points for specific occasions, channels and markets. We will utilize our improved data and analytics to optimize our promotional ROIs. We will design and renovate products to eliminate features and ingredients that consumers won't pay for and instead add features and ingredients that they will pay for. All of these will contribute to better margins. Let's now turn to our cash flow. We will get post upfront cost -- cash outlays related to the spin-off in 2023 with some spillover into 2024. We expect to grow cash flow in 2024 to roughly $1 billion. Thereafter, our cash flow is projected to increase steadily as our operating profit and net income growth and as we continue to improve our cash flow conversion. Driving improving conversion will also -- will be our increasing profit margins and sustained discipline on working capital. This improved cash flow puts us in a very good position. It gives us flexibility to invest more into the business be it in capacity or rapidly growing snacks brands or in capabilities around small pack formats. In fact, we expect to grow cash flow over the next few years even as we raise our capital expenditure to expand capacity globally behind Pringles, Cheez-Its and Pop-Tarts. Now let's discuss what you should use as the base for your forecast. This slide starts with estimates for 2023, excluding W.K. Kellogg Company that we believe is close enough to an apples-to-apples base that you can use it to roughly calculate year-on-year growth rates for 2024. Our guidance for 2024 is more fully representative of the new Kellanova. Keeping in mind that it is very early to be giving outlooks for next year, our guidance will start out with a fairly broad range. We look for net sales to be in the range of $13.4 billion to $13.6 billion in 2024, which on an estimated ex-WKKC-23 base of around $13 billion would imply organic growth that is in line with our long-term target. This will be led by sustained momentum in snacks and emerging markets, and it will feature a better balance between recovering volume and moderating price mix. Operating profit is projected to be in the range of $1.85 billion to $1.9 billion in 2024, which on an estimated ex-WKKC-2023 base would imply currency-neutral growth that is in line with our long-term target. This will be driven by our top line growth as well as by continued improvement in gross profit margin. If you're calculating EBITDA, you should add to this operating profit range or depreciation and amortization figure that remains at roughly 3% of net sales, and you'll derive a range of $2.25 billion to $2.3 billion of EBITDA. Our preliminary projection for earnings per share is somewhere in the range of $3.55 to $3.65, which on an estimated x-WKKC-2023 base would imply currency-neutral growth that is in line with our long-term target. Interest expense will likely be somewhere close to $300 million, while other income will remain low despite stronger financial markets in 2023. This is because we plan to continue to derisk this line item. For now, we are assuming an effective tax rate of about 23%, though this will depend on the direction of global rates. And we've already discussed cash flow, which is expected to remain strong in spite of some remaining outlays related to the spin-off and increasing capital investment behind growing brands and pack formats. In summary, we expect a strong first year out of the gates for Kellanova. So let's put all of this together with a summary of how we view Kellanova's new long-term algorithm. Our net sales growth target of 3% to 5% over time is an acceleration that reflects our more growth-oriented portfolio. And to deliver this consistently, we are focused on restoring balance between volume growth and price/mix growth. Our operating profit growth target of 5% to 7% over time is also an acceleration. It reflects the better top line growth of Kellanova as well as our confidence in both near-term margin recovery and the various drivers that should expand margins across our regions. We've got a medium target -- medium-term target of 15% operating profit margin. Our earnings per share growth target of 7% to 9% is another acceleration, and it should become more durable as we continue to derisk the noncash, nonoperating pension income line. It's important to remember that our goal is not just to deliver 1 year of good growth, but to produce growth that is balanced and sustainable. Meanwhile, we continue to -- we plan to continue to pay an attractive dividend targeting a 50% payout over time. Put it all together, Kellanova is a faster-growing, higher-margin company with the ability to generate above peer average -- above peer average results and shareowner return. Importantly, each region contributes to this long-term algorithm, as you just heard from each of the regions. Our more developed market regions, North America and Europe, provide the steady foundation for our growth. North America grows top line a little faster, owing to its higher snacking mix, while both expand their margins and deliver mid-single-digit operating profit growth over time. Latin America and EMEA are larger contributors to top line growth, as you would expect from their heavy emerging market exposure, and their margin expansion drives operating profit growth that is in the high single digits. So these are our long-term targets. Durable cash flows and decreasing debt leverage give Kellanova strong financial flexibility. Kellanova will start out with a leverage ratio roughly similar to where Kellogg Company is today, and it will continue to decrease as our EBITDA grows and as we continue to reduce debt with our strong cash flows. We will continue to use our investment-grade credit rating as a guardrail, continuing to give us access to commercial paper and targeting a debt leverage ratio to remain below 3%. Our dividend will remain an important feature of our stock. We start by keeping our dividend hold for 2024 between Kellanova and W.K. Kellogg Company. This initially raises Kellanova's payout ratio to around 60%, but this will be reduced over time, getting back towards our long-term target of 50% within the next few years. We will continue to use share buybacks to offset the dilutive impact of equity-based compensation. And at times, we will buy back shares opportunistically beyond that in order to return more cash to share owners. We will remain on the lookout for compelling M&A opportunities, particularly in the areas of scale in emerging markets, access to incremental snacking locations and capabilities globally and cost synergies. And as always, we will remain very selective and disciplined. And with that, I'll turn the podium to Kris, who will update you on our better days promise.

Thank you, Amit, and good afternoon, everyone. It's great to be with you all today. I'm Kris Bahner, I've met many of you over the years. But for those of you who haven't met me or I haven't met you, I'm Chief Global Corporate Affairs Officer for Kellogg Company, and I've been with the company for 17 years. I have the honor of overseeing and leading a fantastic group of folks who see communications, philanthropy, government relations and sustainability. And I'm delighted to be here today to talk to you a little bit more about our social responsibility strategy. Let me be clear, this is a team sport at our company. Steve talked about our deep commitment here, and I represent the work of so many functions across our global entity. At Kellogg Company, we've had a deep commitment to social responsibility for more than a century long before it became a trend. And I can assure you that at Kellanova, we will continue this deep commitment to our better days promise. And we're going to take that baton and take the work to the next level, leading through purpose. And our particular purpose is ensuring sustainable and equitable access to food for all. We do so by addressing the intersection of 4 key areas that are material to our business. They are hunger, well-being, sustainability and equity diversity and inclusion. And as we move ahead as Kellanova, we not only have a renewed focus on our purpose, but a bigger ambition. Building upon our amazing work and our commitment to people and planet, we are excited to elevate our ambition for creating better days for 3 billion people by the end of 2030 to 4 billion people by the end of 2030, working from our baseline year of 2015. So let's take a quick look at our commitment in each of these 4 areas, beginning with nourishing 1.5 billion people. For Kellanova, well-being is all about the importance of the eating occasion. As science continues to advance and people's taste change, we are focused on innovative solutions to continue to provide enhanced nutrition profiles in our products while maintaining great taste. Our second area of focus, as I mentioned, is hunger, and our goal here is to feed 400 million people globally. And these are people in need around the world. We do so by partnering with food banks on 6 continents and providing essential food to those in need who are facing natural disasters. We also have feeding programs around the world in 20 countries to help ensure children in need don't have to wonder where their next meal is going to come from, and they can reach their full potential. Our third area of focus is equity, diversity and inclusion, and it will remain a top priority for Kellanova going forward. Two aspirational goals in this space, as you can see, one, by the end of 2025, we aim to achieve our aspirational goal of gender parity, 50-50 at the management level globally and 25% people of color at the management level and above in the U.S. Externally, we continue to have a focus on supplier diversity and that is global, and we'll continue to do so going forward. And fourth, that brings me to sustainability, where we will continue to strive to be leaders. We're excited to announce that we are committing to set new company-wide emissions reductions targets in line with the science-based initiative, targets initiative, net 0 standard. We'll do this in several ways: one, by increasing our existing climate targets; two, continue our commitment to responsibly sourcing our ingredients; three, reducing waste; and four, by continuing to offer sustainable packaging that is reusable, recyclable and compostable. We truly believe that the integration of our better days promise with our broader company strategy is the right thing to do and helps us achieve our commercial objectives and make an impact in the world. We continue to embed this work, for example, in our purpose-driven brand campaigns and customer programs to great effect, and you saw our region presidents share many of those examples with you today. Ultimately, we see better days as a long-term benefit across our entire value chain. It's our conviction that a more sustainable and equitable food system has many advantages for our business. It makes our supply chain more resilient and our partnerships with suppliers stronger, protecting the availability of the ingredients that we rely upon. It makes our manufacturing more efficient, as we make the most of finite resources. It drives our reputation, brand equity, sales, as more and more customers and consumers want to buy from brands who share their values. And of course, it helps us attract and retain top talent as more and more individuals want to work for companies that reflect their beliefs as well. And it protects our right to operate by ensuring we remain close to the communities that we serve and stay ahead of fast-moving regulations. I would share that in the last 2 years alone, we have increased our commercial activations in line with our Better Days Promise strategy, more than 47%, and we're committed to continuing this track record going forward. As we said earlier today, and as I've shared with you today, we're already seeing the benefits of this work. Commercial activations are helping drive our top and bottom line objectives, all while driving meaningful impacts in the communities that where we live and work. Finally, awards in this space are one sign, we believe, that our approach is the right one. We're proud to have received a number of prestigious recognitions, I'd name just a few World’s Most Ethical Company by Ethisphere, a most reputable company by RepTrak, we're on the Dow Jones Sustainability Index and we're a top 50 company for Diversity -- from DiversityInc. And we aim to continue to receive these types of recognitions as a responsible company driving this work. And we will remain focused on creating sustainable and equitable access to foods for all for years to come. And with that, I'll turn it back over to Steve for final remarks. Steve?

Thank you, Chris. So as we wrap today's presentations, let me summarize with just a few key takeaways. First, that Kellanova is a strong company that is going to get even stronger. It comes into position from -- it comes in existence from a position of strength, strong top line momentum, recovering profit margins and durable cash flow. And it begins this new era with a portfolio more oriented toward growth than ever, and we believe more oriented toward growth than most of our peers on top of that. More than 80% of our sales come from snacks or emerging markets, which means the vast majority of our portfolio participates in categories and markets that have led and will continue to lead overall packaged food growth. We compete in these markets with leading share brands that are highly differentiated and have demonstrated exceptional growth in recent years, and still have plenty of runway ahead of them. And we add to this portfolio and track record of growth by sharpening our Differentiate, Drive & Deliver strategy, making our strategy more fit for purpose for the new Kellanova portfolio and the new Kellanova organization. And that is why we believe Kellanova is such an extremely compelling investment opportunity. We get to build on what is already a strong base, what is already a proven track record of growth and apply it to a greater focus and a newly refreshed strategy. We now make our enviable portfolio even more growth-oriented, directing resources to the biggest growth elements of our portfolio. We have targets and plans in place to leverage what is inherently a high return on invested capital business and strive to even improve those profit margins. And we anticipate this will drive faster growth in net sales and faster growth in profit, faster than Kellogg Company, faster than our peer group and doing it in a way that is sustainable and that is very dependable. The result is a compelling investment opportunity for all stakeholders. We really appreciate the time that you spent with us. Part of delivering is delivering a good meeting, and we're finishing so far ahead of schedule that I am now going to ask my colleagues, my leadership colleagues to come up on stage, and we're happy to answer the questions that you have.

All right. Ken, do you want to lead us off? Perfect.

Ken Goldman, JPMorgan. In the regions where you're keeping cereal, you're also generally trying to grow snacks. It seems that at a faster pace than cereal, at least that's what some of the pie charts would suggest. This morning, we heard about the benefits to WK Kellogg are being separated from snacks in part because it will be properly resourced. So I'm just curious what prevents Kellanova from falling into the same pattern of resourcing that inspired you to maybe divest WKK in the first place, if that makes sense?

Yes. I'll start and invite the regions to also pipe in. So we get asked the question, so why did you keep the international cereal when you spun off the North American cereal. And I think it's a very logical sounding question. Remember that, that international cereal, half of it is in developing markets. In the developing market cereal, we think, is a terrific growth driver for us. In the developed market cereal, there's clearly an element of scale that really matters to us. So you think about the European business and the scale that, that gives us to really drive our snacks agenda and drive that necessary things with customers and so forth, we think it's very beneficial. In North America, it's already -- they're both scaled businesses, right? And so North America cereal at $2.7 billion in sales, as I talked about this morning, very important category to retailers, highly penetrated. They can go talk to any customer they want. They can be category captains with any retailer they want to because they've got that scale. And so that's really the basic difference there. If you look at Mexico and the types of success we've had in Mexico cereal, the scale that it gives us there as well when we've been growing Pringles for the last 5 years at double digits. So it works very differently outside the North American region and hence, why we decided to keep it. And it wasn't a close call for us. It was really a very compelling rationale that we found. Anybody want to add.

Yes, I think and to add, talking about Mexico and Latin America in particular, I talk about high-frequency stores and the importance of these stores. And really, it's actually the opposite, coming with a wide portfolio, it becomes more efficient and really give us a lot of power to execute a point of sale.

Brian here.

Shumit, wanted to add.

I was -- I was just going to add is the size of the category and the penetration levels in emerging markets is very small. And so effectively, the opportunity that exists at the category itself expanding, and we have scale and a significant presence in those markets. There's quite a lot of upside potential. So we expect growth for us.

All right. Bryan Spillane from Bank of America Securities. So just a couple of cleanup questions first for you, Amit. Just on cash flow. One, I don't know if you gave a CapEx outlook, just kind of how we should think about CapEx, and also working capital, just kind of how it is a use of cash?

Yes. So I think working capital should be at similar levels. We're doing very well on working capital. So continuing to sustain that with continuous improvement, but similar levels. CapEx, I'd say, long-term, 4% of sales right now. In the short-term, as we expand behind 2 new greenfields in Latin America and in Asia Pacific, in Pringles, we will probably see a step up closer to 5%, but then a step down back to 4%, which is kind of where we are and where our peers are.

Okay. And then for you and Steve, just in the charts, it's at least in the medium-term aspiration is about a 15% EBIT margin. And if we compare that to the peers that you are in the footnotes to the slide, it's actually much lower margins. So if you could kind of talk about what would close the gap to those peers is the longer-term aspiration that you could be closer to a 20% type EBIT margin?

So I'll start, and Amit can add. And I think he said during the presentation, 15% is a signpost along the way to something greater, right? It's a point that we will pass. There's nothing structural that keeps us in the way of performing better than that. We've also talked about the scale in emerging markets, and that's a big part of it. The one slide that showed where Brazil is compared to Mexico and India on that path. So as we continue to develop our businesses in emerging markets, that's going to make a big difference. And you see our aspirations around the top line and our gross margin aspirations and improvements, all those things working together suggest that 15% will be a stop point. We'll pass by that on the way to something greater.

The only other thing I'd add is Multipro is about 100% dilutive impact on margins just because of the distributor and the size of that business. And so I think if you add that 100, you kind of already -- you're targeting this getting to that 16%, which is getting us close to the medians. But as Steve said, obviously, going beyond that on a longer-term basis.

Dave Palmer, Evercore ISI. Adding up the high end of the EBITDA guidance for both parts, you get -- I think it's $2.57 billion for 2024. That's a little lower than the consensus at 2.62. Obviously, the Street is not perfect on modeling. But can you maybe help us think about maybe what sort of dissynergies or friction costs might have been a drag versus that '24 number for the 2 companies combined or even divied up per? And then I also had a separate one, maybe this would be for Chris. Just looking at some of the snack numbers recently, like Cheez-It, for example, that's really slowed down quite a bit. I wonder to what degree do you think some of your snack businesses are feeling a little bit more of the drag from COVID comparisons, maybe less of that at-home snacking occasion relative to the more on the go that like a Rice Krispies Treats would be doing pretty well with?

Do you want to start with.

I mean, I think the teams have done exceptional work, right, as we've gone through the separation. And I think to be standing here, I mean right off the gate, Kellanova will have higher margins with our margins to -- we plan to expand margins further. So the fact that we have no stranded margins, right, and we have had plans to grow. I think the teams have really done exceptional work, very careful work, very deliberate work. I think we've taken the opportunity. There are incremental stand-up costs. And I think you'll see WKKC dimensionalize that as they publish the next version of their Form 10. It's not significant, but obviously, there are incremental costs. But we've taken the opportunity to relook at our processes, Chris and the D&A team, redesigned Kellanova, North America. We've done something similar in corporate. And I'd say broadly, the dissynergies are minimal.

And Cheez-It, I would just say that the elasticities that we're seeing relative to the pricing we've taken are about in line with what we expected. We were pretty measured in terms of our return to promotional activity because we wanted to make sure that our supply chain was able to deliver the service levels to customers and get to the on-shelf availability we want to get to at retail. And so in the first half of the year, what we saw with some of our peer set returning more rapidly than we did to promotional activity. You can see that in the data in terms of share of display, share of promotion across our snacking business. We're pretty confident that we're going to exit 2023 with strong momentum.

Michael Lavery from Piper Sandler. You laid out quite a few markets where you're planning to launch and push Cheez-It internationally and just seeing some of the momentum it's had in the U.S., certainly, that could be a big driver of growth. But I guess how patient maybe should we be? You also pointed out some of the shares in -- for Pringles being lower than you'd think or like and in some cases, they've been in those markets for some time. So any sense of just how that runway might look? How long it takes? What are some of the maybe market research you've done or ways to think about how you expect it to progress?

Yes. So I'll start, and we can talk with Chris about Canada, and Nigel about Mexico, but Pringles, obviously, is a very global brand right now. So starting with that, the reason we pointed out the shares is the brand has done terrifically well. And we often get the question, well, what's the ceiling for Pringles -- now how long can it continue to grow like that? And that's why it's important to point out in many of these markets, 3 share means there's 97 left to go, right? So there's lots and lots of opportunity for Pringles. And for the last several years, that's been the big opportunity for us internationally. But we do know that Cheez-It has legs outside of the United States. We know that PopTarts and Rice Krispies Treats does as well because in-market performance has shown that. And so over the course of the 3-year horizon that you're seeing here, we'll continue to drive in Canada, Mexico, Brazil for Cheez-It. We're looking for other markets in Europe as well. But it's embedded in the type of percentage against top line sales for A&P that you see. And so there's no reset coming that says, we're going to launch Pringles -- or excuse me, Cheez-It into 25 new markets in 1-year. We're going to take an approach. We're going to learn from that approach and then continue to improve upon that approach. And that the pipeline does exist. Cheez-It is next in the pipeline. But even still, you have PopTarts and Rice Krispies Treats, which are already in 4 or 5 markets and growing off that. So we'll take that measured approach with Cheez-It next, Pringles and PopTarts line for -- excuse me, Rice Krispies Treats and Rice Krispies Treats lining for who comes next in that. But Chris, maybe you want to talk about Canada?

Yes. Perhaps just as a bit of a proof point on Cheez-It expandability outside of the U.S. We launched it in Canada several years ago. It's done very, very well, and we think still has significant headroom for growth within the Canadian market. The rule of thumb we use between sort of the U.S. and Canada is sort of 8% to 10% is what you would expect in Canada based on a U.S. comparison. So if you just apply that to Cheez-It brand, you would think that Cheez-It Canada should be able to get to a $100 million-plus business over time. It's obviously taken us quite a number of years to build a scale business in the U.S., but it's very well received by retailers, well received by consumers, and we're very optimistic about the future potential business in Canada.

Yes. And in Latin America, probably Brazil is where we've been the longest Mexico, we just introduced. So we're seeing good momentum. So velocity increasing, trial increasing, good repeat numbers. So this is about really continue doing what we know that we can do, both in Brazil and Mexico and the rest of the region. And all this is rolling up to our double-digit growth expectation in salty snacks.

Alexia Howard from Bernstein. So I'm curious about a couple of comments about building scale in emerging markets like Brazil. I seem to remember that the JV with Wilmar in China 13 years ago just hasn't come to that much. But it sounds as though Turkey worked really well. Nigeria has obviously worked really well. What have you learned about the way that these things have played out that informs how you'll get into these new markets or at least build scaling them JVs, acquisitions, et cetera?

Yes. I'll start -- I mean you need the right partner, right, which is not to say places where we haven't had success. We've had the wrong partner. But if you look at Nigeria and the Tolaram partners there, they've been doing business in that continent, on that continent for 40 years, have tremendous capabilities, and you couple that then with the brand portfolio that we have and the capabilities that we have, and it forms a really nice opportunity for us. And Turkey has worked extremely well for us. Nigeria has worked extremely well for us. And China is a unique set of challenges, I think, for any business there and one where it's -- we're lucky, it's a very small business for us at the moment.

Nik Modi, RBC Capital Markets. So just 2 quick questions. Steve, as you guys look to redesign the company as you separate from WK Kellogg, did you tweak or make any adjustments to the organizational design, decision-making kind of how you go-to-market, how you make choices? And then the second question is just, does Kellanova have a capability to use different substrates? And I'm just asking this from an innovation standpoint when you think about other snacking Cauliflower substrates and the like?

Yes. I'd tell you the things that we learned were incredible through this journey. It's been over a year that we've been embarking on this. And as I said during the prepared remarks, and we delved into everything. And so there are certain things when you're a company that's as old as ours been doing business the way we have for so long that you start to take for granted. And when you unpack everything, you get to ask a lot of very simple questions like why do we do this, and you get the classes, the way we've always done this. And perhaps there's a better way. And so a lot of the dissynergies avoidance and the stranded margin avoidance has come from changes in the way we work. Chris Hood took the opportunity to look at his North American structure, and say, there's probably a flatter organization that gets us to answers faster and gets to decision-making in a speedier way. So there's been a lot of that, and you can actually see it in the forecast. And I think you'll see it in the way that we go-to-market internationally as well because we're applying those same learnings to the rest of the business. So very few companies get such a unique opportunity to unpack everything that they do in such a fundamental way. And that's, I think, been a big driver in the reduction of stranded margins for us. In terms of other -- I mean, in our innovation capability, I think, will only grow from here for obvious reasons. We've got -- we've had a lot of work in front of us that we've been doing. That's nearly completed, as you saw on the time line. COVID led to a whole unique set of circumstances around what you needed to do to manage an effective supply chain, which, in essence, put some pressure on innovation. But we will continue to look at all opportunities that are consumer-led that lead to snacking -- delicious snacking opportunities, whether that's the new Cauliflower Pringles, you'll have to watch this space. But I think we've shown internationally, especially there's a lot of ways that we innovate with our food and with our ingredients.

It's Steve Powers from Deutsche Bank. Two questions for Amit. The first one is, why didn't you get an intro video? You didn't get an intro video, only one.

We were going to play Sandman for him. He is a New York Yankee fan.

Very good. A follow-up on the free cash flow. It looks like the free cash flow conversion target looking at the '24 is about 80%, and your comments implied that you aspire to go higher. I guess is there a way to think about what the aspirational goal is, what the path the way to get there is and any limitations that we should be thinking about?

No, I don't think there are any limitations. I think the pension income, which was a structural limitation on the conversion ratio has gone away because the pension income has become a lot smaller for us in '23. I think once the spin-off cost, obviously, that's significant this year. It's kind of -- there will be some spillover into '24. And then once we have passed that, there's no reason why we shouldn't get into the 90s.

Okay. A couple of questions. First, probably Dave and Chris -- we're looking at the food industry and developed markets. It's been growing well above full cycle trends for a while, we have all the inflation in the system. And we're quickly on the brink of undershooting on the back end as volumes not really coming back and prices rapidly evaporating to 0 or in some pockets, perhaps even negative. Is that similar with the situation that you expect for your businesses in the short-term, the next 12 months? In other words, are you expecting to maybe undershoot your full cycle growth because of these dynamics in 2024?

I'll go first and I'll ask to Chris from a European point of view. Can you hear me okay? I don't think there's one read on this because as you go from market-to-market and category-to-category. I think you can see very different things. So I think we've been going up the amount of inflation, and they were kind of coming down the other side. This is going to settle, and we'll see what happens and evolve some of that. But I think dashing back in is something we'd be cautious around. And as I said, I think there's multiple reads across categories and markets, and that's how I'm seeing it at the moment.

Yes. I would just say, I think we are anticipating a return to an operating environment that looks a lot more like 2018 and 2019, pre-COVID. We're still operating with elasticities that are below where they were back then. We expect those to normalize over time. We're looking very closely at the balance between price and promotion to make sure that we have that balance right in the marketplace. So that we are measured in our approach, yet still competitive in the marketplace. So that's something we do on a continuous basis.

Okay. And one question for Nicolas because I still have the mic, and he's there. So I was surprised to see your aspiration or expectation to grow margin when at the same time, you're showing us all these great growth opportunities, the ability to drive more distribution for Pringles more high frequency, all that costs money, right? All of it's expensive, particularly the DSD and getting to those high-frequency accounts. So why don't you -- why aren't you showing is an algorithm that takes all those savings, efficiency, scale benefits? And is plowing that money back into driving the growth? Why are you confident you can drive the growth and still deliver margins at the same time?

Sure. Great question, Jason. I think it's a combination of different things. Remember, we have some mature categories versus others. So that is helping us also fuel a lot of the growth, but we also are conscious that we need to continue to drive that across the region and across the different categories. So we're really focused on making sure that we have the right portfolio, the right offerings, but also a lot of that coming from the way we are going to source our products moving forward, that's going to give us a lot of that growth. Now the investments that we have here and the way we have built that in the algorithm are all inclusive of the investments that we need to do to continue to drive that business forward. So we feel good about what we have here and the fact that we can do both.

Cody Ross from UBS. I just want to unpack your top line outlook a little bit. On the top line, can you give us an idea of how you think about volume versus price in your outlook? And then also within the volume portion of it, how much is just expansion into white space opportunities that you guys outlined today?

Yes, I'll start and if anybody wants to add. I'd start by saying obvious -- maybe stating the obvious, but if you would rewind the tape 3 years ago and say that as an industry, our categories, if you could raise price over 30% in a 3-year span and have volumes down in the 4% to 6%, you'd be pretty well astonished and say that's probably not going to happen because there's never been a time in life where elasticities didn't respond or responded -- did not respond in that way. And so I think the consumer, obviously, has been incredibly resilient. But what you're seeing now is finally, elasticities are starting to show up in a way that is a little bit more pre-COVID like, although not all the way back. And it's very difficult to find where that volume is actually going. And there's a lot of theories out there and so forth because it's not really going in our categories to private label in a meaningful way. It's not really going to away from home and people aren't really eating a whole lot less. And so I think there's been a whole lot of creativity that's happened in pantries, that's eliminated food waste, that's probably run its course. But also inflation is now pretty much become much more benign relative to what it's been. And so we see a better volume value equation -- a better volume value equation outlook going forward. And it is our intention to definitely drive a better volume performance than we've seen because it's important to get trips to mouth, people eating the food, but also factory absorption and things of that nature, it's important to have that relative balance. So everything that you've seen here, we don't -- we are not forecasting the type of RGM activity and pricing activity that we've seen for the last couple of years, and we believe that, that mitigates the pressure on volume. A lot of the volume that we're seeing is not necessarily white space, but it's stepped-up innovation. It's increased household penetration. It's getting back to so many of the basics around the building blocks that create that better value volume equation. And we don't have the same pressure that we've had over the course of the last 24 months in terms of price. And I guess the final thing I'll say, it's a bit rewinding the tape I said you'd probably sign up for that level of pricing increase with the degradation of volume being fairly minimal. But there was a lot of skeptics everywhere that said there's no way that the food industry can take the level of price necessary to cover these input costs. It's just not going to happen. And then it happened, and it happened again and again through so many cycles. And so there's been a resilience all around that I think has served us well. But in the future, I think there's going to be a better opportunity to balance that value volume equation than there certainly has been in the last 18 months.

I think the only other thing I'd add is we've got capacity coming on stream in certain areas where we've been capacity constrained. So Pringles snacks in the U.S., some of the small sizes, some of the variety packs. So that capacity is coming on stem. And then I think on a more medium-term basis, we have capacity constrained and show its region on Pringles. We're selling every can we make. So we're putting in a new facility there because we are totally sold out. And so that should be a volume driver, likewise, in the Latin America region. So I think there is some short-term capacity which is coming on stream right now, and then there will be more that will take a little longer as the greenfield sites come on to play.

Pam Kaufman, Morgan Stanley. So part of the rationale for the WKK separation is that it gives them greater flexibility to focus on their strategic priorities has been part of the combined company in any way, held back the Kellanova business? And does the separation unlock any opportunities that you wouldn't have had otherwise? And I guess on the flip side, does it create any impediments?

I think from my perspective, and I think from all of our perspectives, the benefit of focus does work both ways. So Chris' organization, for example, is 100% focused on the remaining portfolio and not necessarily trying to figure out how are we going to grow cereal in what has been a bit more of a challenging environment. And so certainly some benefits to focus. But the real benefit of focus does go to WKKC,right? I mean they're 100% on winning in North American cereal. And one of the dissynergies that is very well worthwhile is having 2 separate sales organizations, we already have a scaled-up sales organization for our portfolio, obviously. But having a selling organization that's 100% dedicated to just cereal, I think, is a meaningful difference and will be a meaningful difference. The other thing, I think, and we've tried to highlight it here is, I think our portfolio's growth is underappreciated. And it is absolutely up against any peers in terms of the best snacking companies historically the last several years, and we think on a go-forward basis as well. And I only semi-flippantly say, Chris mentioned in his presentation, I'm not remembering it was Chris. Somebody said, when you -- maybe it was Gary, when you say you work for Kellogg, you're greeted with a smile, right? Nobody says, what is that? Well, the other side of that coin is you tell somebody you work for Kellogg and immediately, it's all, 'Oh, you work for the cereal company." Well, Kellanova is a brand-new day were actually look at this portfolio. And I think this portfolio has a chance to shine through and be appreciated in ways that it just hasn't been appreciated in the past.

Rob Moskow, TD Cowen. Now that you have 28% of your sales coming from emerging markets, Amit, and those markets are very inflationary. There's been currency devaluations. What kind of pricing should we expect from that part of the business because it obviously can form a lot of the 3% to 5% top line revenue?

Yes. Maybe I'll invite Nico and Shumit, to just give a little bit of perspective in their markets, and then I'll come back.

Yes. Well, we certainly watch very closely what we need to do from a pricing perspective. So I won't be able to share specifics, but certainly, it's something that we look at. And we look -- we use all the RGM responsible. RGM -- sorry, price increases, promo prices, price pack architecture, all those levers we use. But the important thing here, and we have done it in the past throughout the different cycles of inflation is making sure that we're looking at different retail environments and making sure that we have the right price points to make sure that we are competitive in the market. And that's exactly what we do and what we will continue doing.

Very similar is we want to just make sure we have a presence across the whole pricing pyramid. And so effectively, that ensures that we have -- we're approaching the right consumer segments and we have the route to market and deliver against it, which allows us to manage the volume forecast that we're looking for moving forward.

So I think just from assumption standpoint, as a gradual recovery of volume into '24, right? Obviously, balance between price/mix in '24, but a gradual recovery of volume. And then I think as we go later on into the cycle are probably more volume-led as some of the bigger investments -- bigger greenfield investments come through for the entire company.

Casey Parker [indiscernible]. I had 2 questions. I'm not sure for who, but the first had to do with a little bit of the timing of the transaction. Just now that there's more light on the next 2 years for WK in terms of pretty bad margins trying to climb the hill and make some big investments. I mean, was there any thought of maybe waiting a little bit longer until they are in a better footing? That's the first question. And the second had to do with the payout ratio. I think for a growth company, a 50% payout ratio almost says that it's a little bit more mature. So was there any debate about taking the opportunity to reset the payout ratio to have more cash to either buy back your stock or reinvest?

Yes. I'll start and Amit may want to add. In terms of the timing, we actually really like the timing for WKKC. And I think you saw it this morning and the feedback that I've been getting is very credible plan, absolutely clear what they need to do, and I think we've assembled the team to actually go and do it. And they've got real momentum. Now some of that is clearly flattered by what they're cycling, but human beings being what they are, it's really great to be on a positive trajectory. And they're on a positive trajectory for revenue, certainly for share. And so they've got this momentum coming out of what will be a fourth quarter spin that I think will serve them very well, and an absolute understanding of their capital structure and how they're going to fund exactly what they want to go and do. And so I think the value creation for them is very real, very tangible and very action-oriented for them to go do that. So I really like the timing. I think we never really had the debate around given the challenges that they face, did that create any unnecessary challenges. In fact, we saw the momentum and everything that I just mentioned being a positive. In terms of the payout ratio, I mean, I take your point. But obviously, we've been a company that's been in business for quite a very, very long period of time. And our dividend has been an important part of the way we manage our capital. We're an investment-grade company that pays out a dividend quarter in, quarter out, and we've never deviated from that. And out of the gates, we wanted to make sure that our dividend between WKKC and Kellanova remain whole. And we didn't want to overburden WK with a heavy payout that would put too much burden on them to get what they needed to get done or lever them up in a way that we didn't think was responsible. And so that's what's come into play. Now as Amit said, we have the ability as we grow profit to bring that payout ratio down from where it is, not cutting the dividend by any stretch of the imagination, but perhaps growing it at a slower pace than our overall cash is growing. And so we still think of ourselves clearly as a growth company, but we have a heritage of a dividend that we think is very important to maintain.

Yes. And I think the only thing I'd add is we obviously did study it. It's in line with our snacking peers. So we're not hugely deviant, right, in terms of where the 50% target is. It'll takes us a few years to get that. From a CapEx standpoint, we have all the capital we need to fund the growth and the plan that you heard. So that's been built in. So we feel good about our ability to drive the growth.

Rob Dickerson, Jefferies. Steve, you called out the core 5 brands, I think it's about half of total company sales. And then there's also opportunity to scale on a geographic basis, it sounds like almost across all regions. But then you comment on the potential to potentially kind of expand geographically with some of these brands. So just simplistically, I'm curious, is it a -- Pringles has already done it well, so we'll continue to push on Pringles and maybe that's still the real opportunity? Or have you already done the work and said, maybe there are opportunities clearly in parts of Western Europe, where we can expand Rice Krispies Treats. So very basic, but it always seems like you continue to focus on what's worked versus putting a lot of eggs and kind of what you haven't done yet.

Yes, I think it's a balance of both. And as we go through our planning cycle every year, it's about making choices on where we want to allocate our resources, right? And so Pringles has clearly been a winner for us. And as we invest capital in Pringles, for example, it's got a very high ROIC. And again, when you look at our shares across many of these markets and our growth rates, it points towards investing enough in Pringles to make sure that we continue to do that. However, we also recognize that we're looking at Cheez-It and we see an opportunity, and we know it plays in other markets, but that's why we're taking a more measured approach. And as I said to Michael, we're not adding 25 markets overnight because that would distort resources in such a way that are obvious organic opportunities in front of us that we're executing, i.e., Pringles internationally, but also Cheez-It in its home market, Rice Krispies Treats in its home market would perhaps be -- they'd be starved for resources. We don't want to do that. So it's iteratively going through that resource allocation and coming up plan -- with plans that expand us outside the United States that are meaningful, but don't distort the resources in such a way that the very real organic opportunities for these brands in their home markets are not underfunded.

Priya Ohri-Gupta with Barclays. Amit, you touched a little bit about on the select M&A opportunities. As you think about that in the context of the net leverage target that you've outlined, should we expect that to be accommodated within that? Or is there room to flex that up for selective opportunities?

Yes. I think we normally would flex it up for selective opportunities and then rapidly come back to the levels we'd say.

I mean -- so what we heard this morning was from WK was kind of going back to the Kellogg masterbrand strategy. And so given that you've got some brands in your portfolio that also have the Kellogg brand, kind of how do you -- a, is that something you'll integrate into what you're doing with Eggo and Rice Krispies Treats and PopTarts? Or perhaps as the Kellogg brand really fade in terms of its sort of being attached to those brands?

So a couple of things. And Doug articulated this in terms of masterbrand versus multi-brand. And so there really is a multi-brand. Kellogg is important, obviously, but theirs is a multi-brand approach. So give the chicken and Eggo for dinner is about Frosted Flakes, PopTarts and Mini-Wheats, right? So you have the brands actually that people care about embedded in that, whereas historically, it was the Kellogg masterbrand being advertised hoping that, that then had enough of a halo that drove you to purchase Pop -- Frosted, Mini-Wheat, Frosted Flakes and so forth. It wasn't as compelling. And so that's where they're going, multi-brand approach, and it's shown good effectiveness. We have had a masterbrand, multi-brand approach in Europe quite recently that has served us pretty well. It may be leaning a little bit more towards master, but really incorporates on the multi not to get too cute about it, but it really is important. Where masterbrand works for us is outside the United States in brands like noodles in Africa. So when you go to Africa, and Shumit can talk about this, I mean, Kellogg is an aspirational brand that is very dependable, very affordable and very loved. And so putting that on a noodles immediately gives it legitimacy, and it's helped us grow our noodles business outside of West Africa. And so as we think about masterbrand outside the United States, there's real opportunities to leverage Kellogg in that way, but it's different than the way that they're thinking about in the United States.

All right. We really appreciate your time and your interest. I do want you to know that your IR team has not changed at Kellanova. So you still have a man to [indiscernible]. You still have [indiscernible]. And of course, you still have Jamie Duies. So please, if you do have follow-ups, and I suspect many of you will. Please do not hesitate to call. Thanks very much.