Kellanova (K) Earnings Call Transcript & Summary

Welcome back, everybody. Day 3. Hopefully, the conference is going well and everybody is finding it really, really productive. And we're really excited, really excited for our session this morning. So I want to welcome our fireside chat with Kellanova. With me today is Chairman, President and CEO of Kellanova and current CEO of Kellogg, as you all know, Steve Cahillane. Steve, great to see you.

Great to be with you here, Andrew. Thanks.

Appreciate it. So maybe just a quick one to start. Understanding there's still some customary approvals that you've got to get through. Maybe can you give us any updates on when in the fourth quarter you expect the spin-off transaction could take place?

Yes. So you've heard us mention for a while now, our confidence in the fourth quarter. We remain very confident in the fourth quarter. July 31, we started running what we call company and company, which is essentially running the water through the pipes before putting up the drywall, so to speak, to see exactly what works, what doesn't work, what needs to be improved. That has gone, I would say, remarkably well. And the team has done an exceptional job, continues to do an exceptional job. And the way to think about that is WKKC is, in effect, has been since July 31, operating under the umbrella of Kellogg, but as a separate company. Everything from order to cash, collections, sale -- the selling organization and so forth, with a great deal of effectiveness. So we're confident that it's working, and we're actually -- we'll be making more announcements in the coming days, but we'll be closing and spinning in October.

Got it. Great. Excellent. You recently hosted an Investor Day, which you effectively unveiled the 2 post-separation company strategies and financial outlooks. I guess for those that either couldn't attend or didn't listen in, what were really the most important messages that you wanted to convey that day?

Yes. So we obviously made the announcement June 21 of last year that we would do the spin. And there was a lot of questions around the industrial logic around it. And I think there was a pretty clear understanding of that industrial logic. But some of the biggest questions were, yes, but what about dissynergies? What about stranded costs? Is this going to be -- is this juice worth the squeeze? And there was some estimates out there around those dissynergies and stranded costs. And I think what we showed during the Investor Day, it was much less than feared. So if you look at the EBITDAs of the 2 companies, there's -- you'd see that we've done, I think, a pretty exceptional job at minimizing dissynergies and stranded costs. That was one. I think the other from the WKKC side was the compelling logic around focus, attention, its own sales organization, the prioritization that happens that will create the opportunity to turn that into a more effective business. And then finally, we've been talking about this for a number of years now, how our portfolio has really pivoted to more of a snacking emerging markets business. But I think there was a number of light bulbs that went off when you actually show the Kellanova pro forma and say, this business is now 80% snacking in emerging markets. I mean, 30% emerging markets. And even though people kind of knew that, I mean, people follow our company, smart people, I think to see it in that stark way and understand that that's going to be the business going forward. This really is a snacking powerhouse, was kind of a discovery for some people. The other thing when you think about our top 5 power brands, really differentiated brands, Pringles, Rice Krispies Treats, Pop-Tarts, and on making up 50% of our sales going forward. And again, a very, very differentiated brand. There's only one Pop-Tarts There's only one Pringles. And obviously, I'm a little biased, but they are very, very differentiated brands that have been performing very well for 4 years now. And then the final thing I'll say is when you look at our performance on a pro forma Kellanova basis and you stack it up against some very successful snacking peers, I mean we're right there, they are better. And so I think those were some of the messages we wanted to get across, and I think those were some of the messages that landed.

Maybe the follow-on, Kellanova is essentially 80% to 85% of Kellogg's company's net sales today. So the question we get a lot is, what will make it different as a stand-alone company? And why should that produce better and more consistent financial results over time?

Well, as I said, I think it will shine a brighter light on the portfolio, as I already mentioned. It will shine a brighter light on some underappreciated assets, Africa, for example. We get a lot of questions about our African business. And I don't think we've been effective enough at explaining the true competitive advantage that we have in West Africa, in particular, that we're spreading now to the Gulf states as well as South Africa, and how that has really inoculated us from some of the real challenges that consistently come in emerging markets. I mean, for 5 years now, we've been growing nearly double digits in that market, and there's a reason for that. Because I think all those things will come to be better appreciated by the markets. And then the final point, just as WKKC can be more effective running that cereal business because it's their main focus, it's the absence of a challenge for the Kellanova business going forward and it's a real focus around growth and how you really focus your capital and your attention on the future and future growth opportunities. And you'll see even in our capital plans, we're going to be about 3.5%, 4%, 4.5% on an ongoing basis in terms of ratio of CapEx spend, really about 4%, but that may go up to 4.5% or so in the next year or 2 because we need greenfield sites for Pringles. We put a site in Malaysia a number of years back, and it's completely full. We put a site in Kutno, Poland. We just put a sixth line there, completely full from the moment it went in. And we have unmet demand in Asia and Latin America that we know. Every capital investment we've made in Pringles has had an incredible ROIC because the brand has got demand that we know we can create and that's unmet. And so you'll see that a lot more, I think, clearly as we spin off into Kellanova.

Got it. You spent a lot of time at the recent Investor Day talking about the important role that you expect sort of each region to play as you strive to hit the top line growth target of 3% to 5%. And I think it might be helpful if you could walk us through maybe what sort of growth you're expecting from the more well-established snacking businesses in the U.S. and North America, maybe versus the contribution you're expecting from emerging markets and some of the other overseas markets that you currently operate in, just how the build up to that sort of 4% to 5%?

So you saw we took our long-term algorithm up based on the confidence we have on the historical performance of the Kellanova portfolio. So if I start in North America, which will be obviously a snacking-led -- more snacking-led business now. Again, the biggest the brands being cheese, and in this case, in Pringles. We see low to mid-single-digit growth going forward, driven by that portfolio and bolstered by really solid performance in Eggo as well, but led by the snacking businesses. Europe -- for 6 years now, we've been growing in Europe, which makes us a little bit unique because it is a challenging developed market in many cases. But our Pringles business continues to be the driver of growth there. We kept cereal very purposefully in the Kellanova portfolio because it provides important scale for us, and it's a good business. It's a stable business. It's bolstered by great brands like Crunchy Nut, just a terrific brand. Tresor, biggest Continental European brands. So a good business there, but a stable business. And so you look for low single-digit growth in Europe and that growth being driven by the continued exceptional performance of Pringles. Latin America, you look to mid-single-digit growth. And again, we have a very important cereal business in Mexico. Roughly, a 65% share business there. Again, purposely kept that business because of the scale advantage it gives us and has really allowed us for a number of years now to grow Pringles in an exceptional way. And then you look at our EMEA region, which, as I just mentioned, has been growing exceptionally well for a number of years, and we look for a high single-digit growth which would be a call down from what it's been doing, but again an exceptional performance. And that's led by, again, a snacking business that's performing very well. Our noodles business, which I mentioned is probably underappreciated. And we do get some questions, "So why did you keep the noodles business if you're a snacking business." And what we said is we're a snacking led business, but one of the reasons we like noodles is it actually grows faster than snacks. I think it's an exceptionally good business. And in Nigeria, is one example, we have a joint venture that we don't consolidate. It's the manufacturer and marketer of Indomie noodles as well as other household staples and it's about the best penetrated brand in West Africa. And so there's a lot of reasons to really like our EMEA business, and we're counting on that for high single-digit growth and have a lot of confidence in that.

Brands like Pringles, Cheez-It, Pop-Tarts, Rice Krispies Treats, undeniably differentiated brands that have been greatly successful here in the U.S. I guess, what gives you the confidence you can sustain their growth domestically and expand them internationally where some of them don't necessarily exist today, in case of Cheez-It and what have you?

So we have a great history of growing those brands. And then we launched Deploy for Growth over 5 years ago now and we exited DSD, many of you will remember that. And there's a lot of skepticism going all the way back to when we exited DSD and there was a notion that without DSD, these snacking brands are going to suffer, you don't get displays, you won't be able to control your shelf positions. And I think we've proved that demonstrably false, and those brands since then have performed very, very well because we've invested in them. And we've invested in really good consumer messaging, really good promotional programs with customer, and for a number of years now, they've grown and they've grown reliably. And we'll continue that performance and we'll continue to invest in these. See our algorithm. We also see us continuing to invest A&P in those brands in North America and around the world. Then the second part of your question is why do we believe they can travel? A couple of reasons. Cheez-It, we get asked many times, why is it still mostly domiciled in the U.S. It's a very strong brand. We launched in Canada a couple of years ago, it's been successful. We now launched in Brazil and Mexico and early days are showing real promise and real success and we are looking at Europe and other markets. And so we've demonstrated to ourselves that we know how to do this. We get the food right. Obviously, cheese is a very local profile, you have to get the flavor, right? So we have Parmesan, for example, in Brazil. We don't have that in the United States. Sometimes Snap'd as a platform is a better expansion opportunity than the core cracker. And so we get the food right, but it's still real cheese, Cheez-It with real attitude and real cheese, that's the kind of the center of the positioning and it's worked well. I mean some of our other brands, Rice Krispies Treats is already very successful in Europe and Australia. And so we're -- maybe we should have gotten started 10 years ago, but there's no time like the present. And so we're not going to try and tackle 30 countries all at once. But we've got a plan over the coming years to take one country at a time, continue to refine the playbook. We learned it from Canada. We absorbed those learnings to Brazil. We learn more in Brazil, we're applying those to Mexico. And so we'll continue to do that, and we see a number of years of really good, steady incremental growth coming from some of these power brands and how they'll travel outside the United States.

You touched on Africa a bit before. It's a market. Many of us don't have as much visibility to. Maybe you can provide a little more detail and color on that business. What's the strategy in the region is and your outlook for future growth, how that looks?

Yes. So I mentioned a couple of things about Africa, but it really is a fantastic business for us. And under Amit Banati's leadership, he's our CFO, here with us today, we really altered our strategy in Africa and adopted the affordability pyramid. And so historically, if you go way back to when we first went into Africa, we went into South Africa with cereal. All the way back to Mr. Kellogg's days and had to really develop the habit for breakfast cereal, and it is a very premium product. And so it's a natural limit on what you can achieve. And so what we've done in Africa is, since then in Nigeria and the rest is in this affordability pyramid, we start with something that maybe 2x the cost of a local kind of untraditional food and go up the pyramid from there with Pringles being at the top. And then we really focus on route-to-market. And so in Africa, we get asked, why do you own the distributor, Multipro. Well, Multipro is the moat that we have around Africa. We are 51%, but it's basically a route to market for everything that we sell through our [indiscernible] joint venture. I mentioned Indomie noodles, cooking oils and so forth. And we get to every single traditional point of sale that you wouldn't be able to get to without the scale that Multipro gives you. And so we are now the largest food company in Nigeria. We're a staple item to African consumers. It's the last thing they would cut from their shopping list. And so you have to think about that as an integrated business with Multipro being what we consolidate, but it is a very, very powerful and necessary route-to-market advantage that we have. We're applying that into Egypt, Saudi Arabia, South Africa as well. We've launched Kellogg's new rolls now in the Gulf Coast states as well as South Africa, and that's off to a very good start, #2, Moody's brand now in Africa.

Closer in. Just looking at sort of recent scanner data for maybe the 12 weeks through August 26, perhaps not as strong as maybe expected, not just for Kellogg, but the broader industry as we've seen. Your medium-term sales growth algorithm for calls for about 3% to 5% of sales growth. And we've seen [indiscernible] waffles, crackers, kind of up more low single digit. I mean snack and nutrition bars are down a bit. I guess would you expect there to be a period of time where sales growth might be a bit below the medium-term algorithm that you set out for Kellanova? Or are we just overthinking some of the near-term data for really the industry as a whole and we will get into that more also a little bit?

Yes. I think latter, Andrew, and let me tell you why. When we really launched the algorithm, we've seen these numbers and we've seen these fortress, we saw this coming. And so I know there's a lot of focus and talk around volume and what's happened to our volume and where is the volume going. But if you take a step back and say, okay, 2, 2.5 years ago to where we are today and the industry would have taken something like 30% pricing and in mid-single-digit volume degradation, you'd say, well, sign me up for that. And if you go back just 12 months ago, there was really nobody dancing in the street saying, look at this, double-digit pricing and no effect on volume. Well, it's bound to catch up. And so I think what we were seeing is kind of the cliff and the consumer saying, "Wow, this is quite significant." And we've been saying that every one of our quarterly calls and every public opportunity that we are expecting elasticities to come back, and then they're coming back. They're still not all the way back, but it was always going to be lumpy and hard to predict exactly how it would happen, and so -- I think that's what we're seeing. And so as we look into 2024 and going forward, the consumer is going to start to get used to these prices. Because it's not just across food, it's across everything as we know. And the prices are going to be mostly sticky, and wages are starting to catch up. And so in 2024, I don't think volume has been permanently destroyed. And so -- and the other thing is us, like many others, we had a supply chain that was not nearly as reliable as historically, it would have been. Those things are starting to normalize -- are in fact, have normalized. And so we may have been a little bit slower than others to come back to promotional activity. We're still nowhere close to prepandemic levels. But we have a confidence in our supply chain that allows us to road retailers and really sell some quality merchandising, get some promotional activity, which drives displays under the floor. And so it will continue for the rest of the year. I don't think there's any doubt. There's not going to be a magic, the next 4 weeks, scanners are going to show something different. This is where the consumer is at. But in 2024, the wages will continue to catch up a little bit. We're going to lap all these things and prices will not continue to increase and people used to that new price point. But right now, it's still a little bit of a sticker shock.

It almost feels like an industry, if we can just fast forward 6 months, just start '24. And where will you see this journey or this transition maybe from the anomalous actions over the last couple of years to maybe a more stable environment, right, to your point, wasn't it going to be a linear? And we're seeing that across the industry as a whole. So I appreciate your perspective on that? Your guidance for Kellanova in '24 implies margin expansion in the first year. I guess how are you expecting to be able to overcome any of the dissynergies, stranded costs associated with the spin-off and still be able to achieve margin expansion in sort of the first year post spin?

I think a couple of things. First, from the moment we spend, we're a higher-margin company, right? And I mentioned our top 5 power brands and they're really good margin brands for us. And so we have, based on the velocities and the momentum of our brands, we have a natural mix -- positive mix that started to happen from day 1. I already mentioned that the work that we've done against stranded margins. And so you've seen that in our forecast that we've already tackled much of that. The fact that we're running company and company right now and have embedded that in our guidance should give further confidence to that. I mentioned supply chain and supply chain reliability. Like many others during the course of the pandemic, all our productivity programs were essentially put on hold and you have -- you can't have people working on significant productivity programs when you're really worried about keeping shelves full. And so we'll get back to targets around 4% productivity at the same time. And so you put all those things together and a higher-margin business, right out of the gate with the target to get to 15% in the near term and why stop there? And so we've seen the opportunity for margin expansion as being deal. We also see it as being very important. And we've got targets against that. We've got the organization really aligned against the need for it. And again, we've got some positive natural momentum that comes from the way the brands are moving currently.

You talked about the medium-term operating margin target of 15%, up from about 13% today. Can you maybe shed a bit more light into what you expect to be some of the more significant drivers of that, call it, 200 basis points worth of margin expansion that you're looking for the next few years?

Yes, it was something what I just said. It flows from the gross margin natural mix -- positive mix that comes from those faster moving brands. It comes from our emerging markets getting to scale. So if you look at -- here's a good example. Look at our Mexico business, that's margin accretive to the company, and now a lot of people would not appreciate that. India is not margin accretive, but it's coming up and will soon be margin accretive. And then you have Brazil, which is on the other end of the spectrum where, for a number of years, it was very margin dilutive. It's making very good progress. The [ Parity ] acquisition has been a very good one. And so you have the natural scale that's happening in our emerging markets that starts to become margin accretive -- margin neutral and that type of negative margin mix never bother us because it's positive dollars coming in. It's not incremental as growth, you know. And so that starts to happen. I go back to the supply chain really putting back to productivity programs that we've had historically and been successful at. And so lots of building blocks that get us to that -- the confidence level that get us to the 15%.

And there are others, and we've talked about this in the snacking space with operating margins already exceeding that 15% level, would likely still further room to go. The 15% target is maybe more of a medium-term target. But how should investors think about the margin potential of this business sort of longer term? Is 15% what you view as sustainable margin level kind of a ceiling? Or are there potentially more opportunity over time beyond that?

It is not a ceiling. It's a signpost along the way to continuous improvement. And I'm not going to give a target and say that ultimately, you have to get to 20% or whatever your number is. But the things that I just mentioned don't stop at a certain time. So scale in emerging markets continues. And we look at -- we look at margin improvements market by market. And so that Africa business that I mentioned is a bit of a margin percent headwind because you've got that distributor business, which we love, because it's a competitive advantage. But the more velocity and the more we put through there, the more that becomes margin accretive or less dilutive. And so we don't see anything structural that stands in the way of performing at the top of peer set over time.

We talked a little bit about this. As we head into the back half of the year, lot of concern of how investors should think about the path towards sort of volume recovery? How much benefit to the top line? Do you think sort of the increased market in promotional activity will be ultimately yield? As you said, a lot of this were things that you just couldn't -- or the industry couldn't have done given supply chain constraints, maybe the last year or 2. So what are you seeing with respect to sort of your interaction with your key retail partners on some of the merchandising events you've got planned for the coming sort of fall, back-to-school, holiday season, what have you? I guess how much visibility that give you to at least, to your point, volume kind of is moving in the right direction, if not necessarily flipping immediately to a positive, if everyone wants to see it?

Yes. I think the rest of the year, we're going to see a lot of what we've seen this year because it's -- as you just said, you can't flip a switch and say, "Okay, everybody is used to these new price comes." But we have had a -- just look at the percent sold on promotion for us and for others, it's very low. It's not close to prepandemic levels. And so there's been a lack of true quality merchandising activity, and you're starting to see that change, but it won't ignite a consumer change overnight, but it will -- it will provide the runway in the path to 2024 that I think becomes more pandemic normalize. And so quality merchandising done correctly, getting the types of lifts that historically we've seen, I think it's very much in the future. And the other positive that comes out of it is remember when the pandemic hit, like we and every -- there's no promotions, everything stopped. And so when you start to layer back in promotions, the tools that we have and the understanding we have around ROIs against promotional mechanics is as good as it's ever been. And so we're going to start by layering in the best, most effective highest ROI commercial activity that we know, and that will start to really, I think, ignite more consumer interest, more consumer demand. But all those variables working together and particularly the consumer, getting to a better place is really important, but I think it points to 2024 really being, which you have to wait for in terms of the volume performance. And then you go back to what I said, that is not -- I don't think that should be taken as any kind of dire businesses in terrible shape. We've never lived through a time where we've taken 30% pricing in a very short period of time and the consumers had a fairly modest reaction. And again, like I said a couple of times now, it's not going to be linear. But the demand -- there's no evidence that we've seen that there's been permanent demand destruction and therefore the brands that we talked about, we know consumers based on all the work that we do still maintain a strong loyalty or strong love for them, and so gives us good confidence as we look towards next year.

How is the retailer feedback and your sort of top to top spin with respect to this plan to spin off W.K. Kellogg. I assume there are supporters which gives you the ability to focus more on items that generate a lot of velocity for them and everything else, but I'm curious just how that interplay goes?

It's been very positive, which we don't take for granted. I think, by and large, the message we got back from retailers from the very beginning was we really understand the logic around why you would do this. From our perspective, however, we don't want any friction. We don't want to have your portfolio be more difficult to deal with. Naturally going in, they know, okay, you have, just to be simple about, you have one person calling on me, now you're going to have 2. That's already adding complexity and you say show me how this is going to add value. But they really appreciate the idea that there's going to be somebody similarly focused on cereal that carries more than anything about cereal because it's an important aisle. And we all know that's a highly penetrated category for them. It goes basket size, basket value, all those things is very important. So they like that. They equally like that we're going to be at Kellanova singularly focused on growth. Like how do we grow these brands even faster? How do we provide the tailwind and grow faster than the rest of your store? And so those have been exciting things for them from the beginning. And I think we've proven as we've gone through this, we've limited friction as best we possibly could. And we got feedback when we went to company and company that I shared with our company internally during a town hall. A number of retailers, one in particular said this is the best spin we've ever seen. I mean it has really worked out. We wouldn't even know that it's happening and I love the way that you're doing it. Thanks for -- thanks for keeping us at kid of the centerpiece of it. Because if we discipline our customers and we discipline our consumers because we're doing something structurally with their business will have failed. And there's still a long way to go. I mean, this is not a victory lap. But as I said, we're going to spin in October. And we're ready, and we're excited about it, and it's a new day for us.

Maybe couple last things. One question I get a lot around this concept of elasticity is, elasticity was more modest for a lot of the time as prices were rising pretty significantly. The question I get is, well then as pricing is lapped, why would elasticity be any more favorable on the way up if you will? I don't have a great answer for that, and the consumers. I'm just trying to get a sense of so many food companies are saying, "Hey, if pricing is lapped, it's purely mechanical, right? Volume will back. But if volume wasn't really as much as we might have expected with 30% cumulative pricing, why would it work favorably the other way? I guess, is the question here.

If I understand the question I think, as I said a couple of times now. It's amazing that we've had this amount of inelasticity and I think there's a -- the way to think maybe, there's a new set, right? We are where we are right now, and as we go into the rest of this year in 2024. Even if we went back to traditional elasticities, I don't think that's a bad thing. I mean, for decades, we've been living with this, and it's been reset at a level where the dollars are much higher. And so I think as we get back into quality merchandising, we all have better tools at our disposal. We all have much better intelligence and much better data, around what drives quality promotions. And so I think actual promotional effectiveness continues to get better. And that's probably the single biggest reason to believe that elasticities may actually be better because you have sharper, better analytics around what's going to drive quality merchandising. And we all need to get better -- get back to real quality merchandising and delighting consumers because at the end of the day, we got to delight consumers. The other thing we didn't talk about this, but I mean innovation was kind of on hold for a lot of companies during the course of the pandemic. You're going to start to see more and more and better and better innovations coming forward, which is always a nice thing to fight elasticities, right?

Maybe last is just touch a bit on how you're thinking about capital allocation priorities as a separate entity at Kellanova as we go forward.

Yes. So capital allocation for Kellanova, not much change from where we are today, right? And so think about an investment-grade company with access to commercial paper being very important. Think about the dividend that we pay, collectively between WKKC and Kellanova, that dividend in absolute terms remains the same. That will take out our payout ratio for Kellanova up to, call it 59%, 61%, that range percent. We want to bring that down over time, not by reducing the dividend, but by growing it slower than earnings growth to get it more to like a 50% payout ratio. You've seen a leverage on our balance sheet come down to a ratio like 2.8x, depending on whose metrics you use. So the balance sheet is strong. It gives us dry powder. So if we want to pursue bolt-on acquisitions, emerging markets, snacks, things like that, wherever we're capable of doing it. So we like that capital allocation. I already mentioned from a CapEx standpoint, I think about 4% in terms of the ratio around CapEx, maybe slightly higher than that, in the first year or two as we had Pringles capacity. But I think -- and obviously, a very, very cash accretive business.

Yes. Great. Oh, good. I think that's a really great place to cut it off. Let's take it over to the breakout question, and please join me in thanking Steve for being with me here today.

Fireside chat with WK Kellogg. With me today are CEO, Gary Pilnick; and CFO, Dave McKinstray, great to be with you, all. Thanks so much for spending some time with us today. We now know October. It's a couple of weeks from now is sort of the date set for the spin. So I think we're all looking forward to that. And hopefully, we've got a group here that can get a little bit more perspective on the plan and the strategic outlook going forward for the company. Maybe a good place to start. You recently hosted your Investor Day, and you discussed extensively why you feel WK Kellogg should benefit from becoming a stand-alone company. Maybe a good place to start would be to remind everyone, what's going to be different, right, about how the cereal business is run as a separate company and why you think that a split away from Kellanova will be a positive for WK?

It's the perfect place to start. And when we're going to give you our opinion about why we think this is different. We're going to zoom out, go a little bit higher level because we'll get into some of the details during the course of this conversation. But it's our opinion, it's also the Kellogg Company's opinion. And you might remember a year ago, you sat here with Steve, it was shortly after we announced that the spin was going to occur. And Steve queried, if you're a cereal company, who would you want to compete against? A big company that has a de-prioritized cereal business or a smaller, we'd say a scale company that only focuses on cereal. Well, that's the underlying logic of the spend. Everything we're going to do is in service of cereal. So I'll just give you a couple of examples of things that are going to be very different because we're a 117-year-old start-up. We'd like to say that. So we're coming with significant capability, Andrew. But at the same time, the startup piece, different types of operating performance going forward. Some of the examples would be, number one, we're going to run an integrated business. Right now, there are 5 separate businesses that we're going to consolidate into one. Let's be clear. That's exactly the right way to organize these businesses in the context of a $9.5 billion North American Kellogg business. But for us, Caribbean, Canada, U.S. retail, Away From Home, Kashi, Bear Naked all come together under one leadership team driving the business. Second thing, which I think is the most tangible difference is we're going to have a direct sales force like the Kellogg Company has now. But it's only going to be focused on cereal. Today, they go into store and they're selling Pringles and Cheez-It and rice Krispies treats and Eggo and cereal our sales force with the same coverage we'll be selling just cereal. And intuitively, you get a sense of how different the outcomes could be. And the other piece would be the investment we want to make. We want to make in our supply chain to modernize our supply chain. We'll talk more about that, I'm sure, later. But we do think coming out of that, we end up with a reliable, resilient, efficient supply chain that drives considerable margin expansion. None of those things would have happened but for the spin because the Kellogg Company would have even better opportunities and priorities to drive their business forward. But that's the reason why we think this business will be better situated to move forward into the future as an independent company than as part of the Kellogg Company.