The Campbell's Company (CPB) Earnings Call Transcript & Summary

All right. Welcome back from the break. Thanks, everybody, for joining us. Thanks especially to the Campbell Soup Company for joining us here on stage. From Campbell's, we have President and CEO, Mark Clouse; and CFO, Mick Beekhuizen. How did I do with that? Pretty good?

Yes, pretty good.

Pretty good. Okay.

Beekhuizen, that's the Dutch pronunciation.

It is.

Okay, okay. I tried. We're going to host today's session by way of fireside chat. So we're just going to have Q&A. If folks in the audience do have questions, feel free to raise your hand and we'll integrate them as we go. We'll -- I'm going to try to balance this between the here and now and the longer term.

Sure.

I'll start with here now just because I think that is -- that has been...

Top of mind.

With people, yes.

You're coming off of what I thought was a very strong quarter. So I guess let's just level set on sort of the state of the business as it -- as we stand here today and as you look at over the balance of the year and into the next fiscal year, just how you're seeing the world and how you're thinking about the business. We'll start at high level.

Yes. No, great. I kind of separate into the things that we control and things that we don't control. But the things that we do control, I would say I feel very good about. I think Q3 was an important quarter for us, not necessarily that the numbers came in dramatically better than we expected, but the pivot in the numbers for the quarter are indicative of making progress on a variety of different fronts that I thought were -- or think are very important as it sets up then for how we look going forward. And probably the most significant to me, you might think I'd say pricing, but that would be second. I think the most significant for me was the progress on the supply chain, the ability to kind of be on our front foot there where we're able to meet demand. Labor was back to a normal level through a lot of hard work. And I'd say the recovery was even a little bit faster than what we expected. I'm sure we'll talk more about later kind of state of affairs there, but I think that was one really important aspect for the future. And then the second was pricing. I think '21 was a year where we did tend to lag, where pricing tended to be chasing, if you will, inflation through the year. I think the third quarter was a quarter where we began to see that normalize a bit more, I think, with -- paired with elasticities that are a lot lower than our historical levels. So not 0 but certainly less than what we've seen historically. And so then, as I think about going forward, so where do we stand right now? I feel very good on those variables. Perhaps the one exception is market share, where we anticipated it. Most of it is related more to demand or, in some places, where we're seeing trade-down. But that tends to be in categories that consumers are trading down into as well. So like let's take condensed soup as an example, where private label shares have been stronger. We do see trade-down in the quarter, but we're also seeing significant trade into the category overall. So in a world where we were down a couple of share points, which was pretty much what we expected, still up a couple from where we started the COVID journey, which is important. I would say we're kind of right where we expected in a category that's healthier and growing faster.

On the trade into dynamic, when consumers trade into to a category like soup, do you have a sense of what percentage of that volume you're able to capture? Is it disproportionately branded? Or does it sort of jump to the more value end of the spectrum?

Yes, it depends really on the cohort. And I would say that one of the things that's been very promising about this period that might be a little different than what we've seen in prior periods, the trade-down. So those that are either coming into the category, into a private label or trading down into private label within the category have tended to be -- are boomers or older consumers, which is very consistent to what we see historically. They tend to be a little bit more value conscious, a little bit more fixed income, making trade-offs along the way. What we have not seen and what we've seen in lieu of that being the story is that the millennial cohort has been incredibly resilient, both the increase in millennials coming in and those that came in during COVID that have remained. So we actually have an increase in household penetration among millennials at this moment, which, of course, is a very important cohort for the future. And I think in support of answering the question that we get asked so much, which is, okay, but can soup keep growing? I think that bodes very well for us.

Yes. Is that in line with your expectations? Can you describe?

I've been -- I would say certainly, we've done everything we can to try to facilitate that, but I would say stronger than I expected it to be.

Okay. I do want to circle back on some of those supply chain costs, et cetera, price or -- but maybe building off that, just taking a step back and thinking about the larger -- I mean, especially for folks in the room who maybe are not -- that aren't as close to the story, just the turnaround efforts that started pre-pandemic and then sort of bled into the pandemic.

Sure.

When you look back retrospectively over your journey at the company and the efforts you had to make to navigate the pandemic, when you come out, I guess, what would you say are the major accomplishments? What makes you most comfortable with the business going forward?

Sure. Well, I am extremely grateful that we had a year before the pandemic arrived because I think that enabled us to take kind of the first bite out of the strategy, which was really about focus and leverage, right? So the need to kind of re-anchor the portfolio and where I would say our competencies really align well was the first step. So as you might remember, we sold about $3 billion worth of assets, and these were really brands that tended to be a hope of being able to move into some perceived kind of higher-growth areas of the store categories. But arguably, not necessarily aligned with what we did particularly well, I think we had an international business that wasn't particularly scaled and thus then made for a pretty diffused level of focus in the company. And so the first effort was really to anchor on what we thought was going to be core North America, 2 divisions, 13 categories. And after 25-plus years of doing this, I've come to appreciate the value of focus, especially in a business that had work to do to turn it around. So in doing that, it also enabled us to address one of our bigger, I think, liabilities, which was our debt level. And so the combination of getting focus in the company and cleaning up the balance sheet was incredibly important as it related to kind of first steps as we head into the pandemic. I think there was a lot of cultural work that had to happen in the company as well. I think perhaps bringing back a level of accountability and orientation to growth, especially on our Meals & Beverages business that had really been kind of positioned as the cash engine or a little bit of a profit center, if you will. And that, as we all know, always sounds good, very rarely results in the outcome that you need and always easy to look back and point out what was wrong, but I think the unintended consequence of the strategy was our Meals & Beverages business was under-resourced, undersupported. And so building that back up, changing the belief in what that business could be and then supporting it appropriately to begin to build momentum. And all of that, luckily, we were able to achieve before we got into the pandemic. And although maybe hard to remember, actually we're seeing some momentum in those areas. And then, of course, COVID hit. And certainly, no one would have anticipated that. And if they say they did, I would be highly skeptical. But nonetheless, it was a mixed set of variables for us. It created a tremendous amount of complexity and challenge across our organization and our network. But arguably, it was also a fairly substantial catalyst to trial and new consumers entering into our businesses and franchises. And so I'd say as you go back to the strategy that we had in '19 that we launched with, that was one of the biggest areas of emphasis beyond righting the ship or fixing the foundation, was to drive relevancy in the Meals & Beverages business. Snacks is a business that had grown before, has grown during, will grow after. But Meals & Beverages was a business that I think for a lot of investors and even people within the company, can we grow these businesses? And so I feel that the progress we've made there has been significant. I look at a brand like Chunky soup, which pre-pandemic or pre-turnaround, honestly, was seen as a value business that you bought 10 for 10 and you waited until it was on deal and yes, it filled you up and you liked it, but it wasn't necessarily seen as something that perhaps every day would be part of your routine. And I think what happened during COVID is, as people began to experience that brand, they discovered that quality actually is really good, a lot better than 10 for 10 and that -- we then paired it with a lot of great marketing, oriented on what its points of difference were, things like protein and convenience, still great value. That business, in the last 2 years, so that's after the bump of COVID, on top of that first spike, 2 years in addition, we're up 25%, 2 share points. Much younger consumer is now using Chunky every day. We've added smart innovation. I don't know that we'll win a lot of awards for the idea of spicy chicken noodle, but when you think about the millennial target or younger consumers, complete home run. And so I think this idea of bringing relevance back was the other big part of the strategy, and I feel great about that. And probably the final big chunk was the margin work on Snacks. And the way I talk about that a lot is that you've got this cloud that's inflation. If you were to look under the cloud at the work that's being done, and I think perhaps if there's a place where the lift was maybe a little heavier than we had anticipated, certainly it was more complex on top of COVID at the same time. But as I sit here today, now a year after kind of having a tough quarter where many of those elements came together, I feel very good about what is underpinning the margin architecture. And if I look at that business without the inflation cloud over the top, I would say we're very close to where we expect. So then it becomes a little bit of a, okay, when the clouds clear, will I see Meals & Beverages continue to grow? And will I see the margin architecture come to fruition? I think we can point to a lot of places where we feel a greater degree of confidence than we might have before. So a little bit of a walk-through, but that's probably, from '19 to where we are, a little bit of our story and how we're feeling.

Great. So maybe picking up on that. So on the Snacks business, the -- I guess are you -- is 17% operating margin, which was the target by '25...

Sure.

Is that -- I mean, I can't see necessarily tomorrow when...

I don't know when that cloud is going to roll off.

Yes.

But I think underlying in the business, I do think it's possible. And I think the things that we've seen -- as always, in a journey like this, you're going to see some things that are probably a little tougher than you expected, and then you're going to find additional opportunities that look more promising. And I think that has definitely been the journey. Important to remember, though, and, again, I've tried to balance this messaging, at the end of the day, what's going to drive long-term value creation is going to be growth on snacking. That's what's most important. The margin is important because it creates that kind of virtuous cycle of generating a better spin-off of cash to invest. But at the end of the day, the thesis on snacking is really primarily about growth, and that's 50% of our business. And so trying to unlock the value of that 50% of the business, I think, is what -- is why we feel like that margin progress is important to complement it. And certainly, everything I see, I feel good about. Mick, I don't know how you're feeling about it.

Yes. No, I agree. I mean it's a continued focus of course, across the organization. I think we're making progress and also to Mark's earlier point, also continuing to work on the structure behind it like, for instance, the integration of SAP. So when you really think about it 3 years ago, our snacking business is really 2 platforms, right? On the one hand, we had Pepperidge Farm and we had Snyder's-Lance. Now it is really one snacking division that we are managing. And we are talking really about the brands across the portfolio instead of talking about two snacking businesses. And you see that also in the backbone when you look, for instance, at our infrastructure. So we were on SAP with Meals & Beverages and Pepperidge Farm. And now we have Snyder's-Lance integrated, and we just completed that in the third quarter. So -- and that basically goes across all of the factories as well, right? So we started with the finance integration, of course, and then we went in waves across the broader supply chain. So that gives us now the ability to look across the supply chain within the snacking business and make sure that we really get the insights that we want in order to continue to focus on productivity, which is obviously very important, particularly in this environment.

I mean that is one of the reasons why we've been -- why we -- why you saw us as excited as we were about supply chain on the call, is because if you think about the last 18 months, the vast majority of our resources have been focused on integration, recovering on labor, trying to operate safely in an environment with COVID being the story. Today, we're at labor levels that are fully loaded. We're not having to deal with an SAP integration or integration of the business. Our ability to focus on productivity and innovation is really going to be, I think, for us, a unique tailwind that we have kind of going into this next chapter of a difficult environment. It doesn't change the environment, but it gives us more tools, I think, to combat it. And perhaps that's why you also don't hear us necessarily, even in the face of what will be certain more inflation next year, that we're feeling certainly not comfortable but confident that with that we can see today, that we've got the right pieces in place to be able to set up for that. And again, never say never in this world what could come in the next 12 months. But for what we know today, we feel good partly because of that combination of variables.

Okay. All right, so let's level set on some of those things. So on the state of the supply chain, both inbound and outbound, how much of the challenge is in the rearview mirror at this point versus bottlenecks that you're still continuing to work through?

Well, I think the structural elements in supply chain, we feel great about. So as -- I would put it into kind of three broad buckets. The first is really what I would call the integration and the harmonization so that our supply chain can work in a more consistent way. That's putting SAP in, that's integrating the Snyder's-Lance network into ours. Arguably, some, as I would describe it, is pick and shovel. So fundamental work that needed to be done on capabilities like planning processes. We call it IBP. But how we go about really managing the day-to-day business, I feel very good about where that sits. The second area was about capacity, and that was primarily in snacking but also in Meals & Beverages. So over the course of COVID, we have added new capacity on Goldfish, Kettle potato chips, tortilla chips, cookies and our aseptic line, which makes broth on our Meals & Beverages side, and then a little bit more capability as it relates to flexibility on pack size or pack configuration. That was, as you might imagine, during COVID, very challenging. And arguably, a year ago when we had a tough quarter, I would argue those were areas that probably put a little more strain on the network than what we would have initially anticipated, which, if I had to do it again, maybe I would have slowed it down a little bit, but boy I'm glad that it's in place now. So we've got that in place. And then I think the third area is really then what I would call just cleaning up a few of the material availability issues that we have. And that's probably work that still needs to be -- I would say it's very isolated. So aluminum cans on V8 single-serve beverage, certain packaging formats on our sauce business. In particular, we outsource white sauce, which is an important part of the Prego business. Those are areas that were still recovering probably, I'd say, through the first half of '23.

Yes. And labor is...

Labor, we are back -- yes, in the first bucket, probably the most significant was labor. So we are fully staffed now. The team did an amazing job. We've cleaned up, I think, places where our employment proposition was not as attractive: our wages, our training, our development. Our retention of new talent is much better. And actually, the performance of the talent -- one of the things that I always was concerned about was with adding -- turning over almost 1/3 of your workforce. How long was it going to take us to get back up to operating at a normalized level? And that probably has been the pleasant surprise where our recovery on that has been faster than expected.

Okay.

And you saw that a little bit in the third quarter.

Yes. Okay. So -- and then on the cost front, obviously you've been battling inflation, as is everybody. You called progressive inflation, significant inflation into '23. Mick, what do you -- how would you frame the inflation sort of wall ahead of you? And what are the sort of the upside/downside risks that you're most focused on right now as you think about '23?

Yes, yes. Yes, no. So maybe first stepping back. If I look at kind of this past quarter, we reported 15% inflation, right, 1-5. Quarter prior to that, 9%. There you see the cutover there really of going into the calendar year. And that is because certain of our contracts are reselling at the beginning with kind -- like, for instance, steel, and then you combine that as well with, of course, commodity prices increasing. So net-net, you saw that uptick in overall inflation. As a result, I expect that to continue into the fourth quarter. And as a result, we have low double digits going into this fiscal year. Remember, our fiscal year ends at the end of July, right? So going then to your point, into the second half of this calendar year or at the beginning of our fiscal year, we anticipate continued inflationary pressures. No surprise. And as a result, we also have taken some incremental pricing, and that's the wave 3 pricing that we spoke about during this past earnings call. We are -- obviously, we are very focused, looking through this calendar year on kind of where inflation is going, various economic forecasts. Of course, a lot of scenario planning as well, particularly as you go further out and particularly as you go into the second half of our fiscal year or basically next calendar year. And that's probably where the biggest, call it, uncertainty is, right, the further out you go. And, I mean, as you've seen, you saw this also this past quarter, where net-net we actually increased our gross margin 90 basis points, which was really because of all the pricing of wave 1, wave 2 that came in, and it allowed us, in combination with the productivity savings that we have in place, in order to basically start offsetting some of that inflation. And that kind of dynamic is going to be a continued focus, hence we have wave 3 pricing, but also, to some of the things that we were talking about earlier, a continued focus on productivity savings. And particularly as we go into the next fiscal year, that will be a big focus of ours.

Right. And so with the supply chain less inhibited, there should be more opportunity to drive some of that productivity that he mentioned?

Yes. I mean if you can -- as you think about how the year unfolds, the first half of the year was a tough labor environment for us. And so that will obviously be one of the tailwinds that will help balance or counter some of the cost headwinds. I think generally, if I were to kind of say to people how to think about the profile going forward, it's not going to be wildly different than the -- certainly relative but to the where we were in Q3, where you're going to probably have outsized top line, you're going to have a little more pressure in the middle of the P&L, and hopefully the net of that is earnings that remain relatively in line with expectations. And I think that, that profile is certainly one that I would expect. Now I will say, appropriately so, we remain -- although we feel, I'd say, much better about coming into '23 as far as not chasing the inflation like we were in '21 or into '22, I will say we're obviously all very keen to stay on top of elasticity. And one of the important variables in this is going to be volume and consumer demand and where do we find ourselves as we go through and execute the third wave of pricing that Mick talked about, which takes effect essentially the beginning of the next fiscal year. On the surface as we sit here today, it's clearly a much more modest impact from elasticity than we would expect. It's not 0. If you think about this quarter volumetrically, we were down about 3% in volume. We would probably say with pricing of around 11%, we would have said elasticities were probably about 5% negative. So about 50% of what we would historically expect. And then that was mitigated by the recovery of inventory and distribution as the supply chain came back, which I think will be a dynamic we'll continue to see to some degree in Q4 and even a little bit into '23. I think as we move forward, what we've got to maintain a level of agility on is to ensure that we've got the right contingencies and flexibilities. It's why that productivity is so important, because one thing I'll tell you is we're not going to sacrifice the long-term health of the brands to cover a quarter. I mean we're going to be smart about this. And I think in the end of the day, we feel good about our ability to manage both. As we get into circumstances where we may have to make trade-offs, we're going to have to find other ways to manage costs. And we've got a lot of tools in the bag, because of that stronger supply chain, to be able to do that or even making good trade-offs. A good example is if you look at this quarter on condensed soup as an example, we expected and did see some pressure from private label. We were down about 2 share points. But if you look at the portfolio underneath our -- what we call our icons, so these are our most important strategic items within condensed, tomato, chicken noodle, cream of mushroom, cream of chicken, we actually are positive on share on those. And so we're protecting those businesses at a little bit of a distorted rate, taking a little bit more pressure on less strategic parts of the portfolio. And again, that's a category where I think going forward, we're going to have to be very mindful of how we think about price gaps, how we think about elasticity and how we keep the balance right between those priorities.

And as -- on -- as wave 3 pricing rolls in and you're monitoring all that, is the -- I mean that -- is the -- I guess is the hope that current elasticities hold, the base case that we normalize, and kind of the downside case that we sort of -- we -- deteriorate and worse-than-expected elasticity?

Yes. We've anticipated a higher tick-up in elasticities in wave 3. We've been very -- I mean, as you would imagine, given that it is wave 3 and the inflation has tended to be a little bit more centralized this round than it was in probably earlier iterations -- in particular, places like oil, cooking oil, wheat, flour tends to hit our Snacks businesses a little bit more than our Meals & Beverages businesses -- so the pricing is a little more concentrated, but we -- it's more surgical in nature. So it's not as necessarily broad based. So we're able to see a little more clearly where the areas are that we're going. We think there will be room. We think price gaps will remain consistent. But I think prudent to expect a little more inflation or a little more elasticity as you climb the pricing ladder. And so if we're wrong there, I think that will be a benefit the right way. But I'd rather be planning for a little bit of a worse situation than having to address that later.

And as you look out into more of the uncertain period, Mick, you were talking about from a cost perspective, if there's a need for further pricing, A, are you willing to go there? And B, do you think -- do you feel like you have more flexibility on the RGM side now that supply chain is back up and running? And what's sort of the balance between list price and RGM?

Why don't I start first and you do a little bit of a customer side? So -- well, I do think there's a little bit of this narrative out there right now that says no more pricing, retailers are going to just shut the door if you show up and how that's not -- it's not accurate and it's not a realistic view of the world. Now I do think what is becoming very much a part of our dialogue is an aligned view on, okay, how are consumers going to react? And so we spend a lot of our time talking about what we're doing to drive demand. And probably more of the negotiation would be around how are you supporting the businesses and do we feel good about that total proposition for a consumer versus necessarily debating whether inflation is real or not, right, which is not really the case. So I think I would just say the short answer is, if the inflation justifies it, I think we recognize that, that's a possibility. I think that we're going to certainly want to minimize that as much as we can through the vehicles we have. There may be some categories, I do think of like a condensed or a broth category that I would say could be very difficult and so we need to be able to do other tools. So I don't know, Mick...

Yes. No, I agree with that. I think on the one hand, it's going to be -- yes, it's one of the tools in our toolbox. I would say be very surgical about it. Also, make sure that we -- on the one hand, we obviously look at the inflation and the potential pressure that it's put on the broader P&L. But on the other hand, we also want to make sure that we are very careful with the consumer response, as you were just talking about, right? So take a very surgical approach there. And then also, not just focus purely on list pricing, which is a little bit where you were going yes, right? I mean there's a lot of different areas that we can go to and, for instance, look at some of the price pack architecture as well as, of course, the productivity, right, and really making sure that, that complete picture in the end allows us to make sure that we mitigate inflation. And that's the way that we're going about it.

What you won't see us do is take bigger bites out of the marketing spending because that -- to me, it's imperative that we keep that going as we roll through this. Although we're down right now, that's far more of a product of the supply than it is the inflation. So you're not going to see us use that as a way in which to bridge that difference. We're going to have to be more creative than that.

Yes. That was going to be my next question. So -- and I would actually argue, especially if you're going to justify more pricing, that market investment needs to go up.

It's got to be. Well -- and I think marketing and selling, both. I mean one of the things that also is true -- and I'm glad there was not an overreaction to this comment when we were talking about it on earnings. But one of the things that's very important, especially in our Snacks business, is that there is a promotional rhythm to it, right? Still, no matter what we wish for, these are very impulse-driven purchases. And so if you're not on display, if you're not promoting the brands, you feel that. And in fact, as supply has been constrained on snacking over these past 12 months, we've had to walk that back, and you see it in our share numbers. Conversely, in the last couple of months, you've seen us put it back on, and you see the share responding to it. So this is a kind of a fact of what you need to do. So what we've got to always manage is that as repricing, we've got to think about it through the lens of maintaining a promotional level of support as well. And so I do think both the marketing and the promotional calendar, right? You might see different price points, could see a little bit different frequency. But more or less similar frequency but probably a little bit higher on the price points.

Okay. So on Snacks growth, and you talked about that earlier as being key, especially as the margin cloud looms. So as I think about Snacks growth that you've realized relative to what sort of is aspirational, my perception is there's sort of been 4 constraints. One is the supply chain and the promotional calendar associated, that, that seems like it's improved.

Yes.

One is sort of the operational integration between Pepperidge Farm and Snyder's-Lance and SAP.

That's still not done yet.

And we talked about that. That seems like it's been doing well. The other two have been sort of this progressive cutting of the tail of partner brands. As well as perhaps, this is my own overlay, maybe some cultural integration. This is software versus the operational side. Can you speak to both those two, just where the cultural integration stands and also where we are in cutting the tail?

Yes. I think -- so how I would describe -- so let's do the partner brands first because that's a more perhaps straightforward question. I think the role of partner brands, as you're well aware, was to create scale for our independent distributors. Essentially, allowing the trucks to be more full is the simplest way to think about it, partner brands-filled space to make as efficient as possible the route to market. As we've grown our businesses and as we continue to look for opportunities to strengthen that, we've been able to begin to walk down that level of partner brand. It's not a particularly profitable part of our portfolio. And although I do think there will always be a role for it, it's certainly not the focus or the priority for us. So I think we're much closer to being where we want to be. I do think it'll still be a bit of a headwind or offset to the growth. It's tended to be about 1 point ongoing. Probably, we'll end up being a little less than that as we go forward and as that pool has just shrunk.

Yes.

So I think it'll still be there but probably at a little bit more of a modest level. On the cultural side, I would argue that the way I would describe perhaps the other barrier is the ability to operate our third-party distributor network in a more consistent way, meaning that where we are very good at it in certain pockets, how do we create that same dynamic more broadly across our independent distributor network. And that is a variety of reasons why, right? The -- everything from what -- how scaled the route is, how profitable the route is. There's a lot of things we need to do, the incentive structure for our third-party distributors. So there is work to be done there, I think, to unlock, more so than I would say what would have been the initial cultural shock of just the difference between Pepperidge and Snyder's. I think as we -- not only from, as Mick described earlier, this idea of having now 1 system but also, I think, one culture is far more consistent. I -- always a little bit, you've got the -- I like aspects of both of the cultures. I don't want to lose the grittiness, if you will, of Snyder's-Lance or the strategic growth orientation of Pepperidge Farm. You really like both of those together in the DSD Snacks business. But I feel like today, we're operating much more as one team. And I think, Val Oswalt and team, who's leading that, has done a very nice job of building that. So I don't feel like that's as much of a hindrance to us as it might have been as we were going through the integration. I think the next level of unlock is continuing to improve the effectiveness of our distribution network.

Good. Great. I think we've got about 3 minutes left. Just maybe as a way to close, your long-term algorithm, about 2% organic growth, about 4% to 6% EBIT growth and 6% to 8% EPS growth, have the building blocks to that changed in your mind relative to how you talked about it at Investor Day? Yes or no?

No. I mean not really. Again, I think most of the elements that we talked about at Investor Day were the things that I felt were areas that we had a lot of control over, right? We might want to argue about how high is high on soup or sauces, but at the end of the day, is it 17%? Is it 16.5%? Where are you on the margin exactly? Where can you get to? There's always a good dialogue around that, but the building blocks to me have remained very consistent. I think this -- when I look on -- and we do a lot of work to understand this, that when you peel back a little bit the environmental issues and what we would see as more transitional. Now when that is, I would hate to speculate. But I think when it does, we feel very good that the core thesis of why we see ourselves as an advantaged company that has a lot of ability to self-generate earnings and growth is still very much at the core of where we are.

Okay. And Mick, from a capital allocation standpoint around -- helping to drive that algorithm, near term what are the priorities? And then sort of on a more steady-state, long-term basis, how you're thinking about that?

Obviously, very strong balance sheet, as Mark described earlier. And I feel very good about that levered sub-3x. In the meantime, highly cash flow-generative business. You see this also in the latest numbers, right? So over $1 billion of operating cash flows, which we typically look at, gives us a lot of flexibility. Obviously also, our Meals & Beverages business is very cash flow generative that allows us really to invest across the portfolio. In our business, as Mark described earlier, really making sure that we support our brands but also continue to support our overall supply chain and invest in that. And that comes back with, for instance, different areas like on the capacity but also some of the automation and some of the other areas that drive in the end also some of the productivity, right, that we just spoke about. So invest in the business, maintain our dividend or when we grow earnings, make sure that our dividend grows with earnings. Obviously very important. We really appreciate that, that's important for investors. And then we have still -- we're in the luxury position of still having excess cash flow at that point in time. So in that, we are looking at, as we described also during the Investor Day, tuck-in acquisitions, be very selective because we don't -- what we described earlier is really having the focus and the focus we really like. We don't want to distract the organization. So -- but if we find a neat tuck-in acquisition that fits within the broader portfolio and really close one of the gaps, we do have now the firepower there. And we continue to look at that, and we are looking at that for both businesses.

Both businesses.

And then separately or finally, we obviously, in the meantime, we have our two programs in place that allow us to do share repurchases so opportunistically. We're putting that in place as well, and we've done that over the past 9 months as well.

Great. Mark, I'll give you the last word. If there's 1 or 2 things that you think investors most misunderstand or 1 or 2 things that you think are most critical for you to achieve over the next 6, 12 months, how should investors think about the company?

Well, I think, first, I would hope or would want investors to understand or to see that the position of the company is certainly dramatically changed from where it was 3 years ago. I think from a focus standpoint, from a clarity of direction, 2 divisions, 13 categories, advantaged brands in those categories with 50% of it being in a highly advantaged growth segment in snacking, and certainly a -- no matter how you look at the world through COVID, in a more advantaged position than going in, Meals & Beverages business with perhaps one of the most flexible balance sheets in the industry, it gives us a lot of ways to win. And I think that, that, paired with the position that we have relative to a variety of economic environments, we're an incredibly resilient portfolio. And if it's stagnation, if it's recession, if it's just continued slow recovery, we are well positioned with the categories and the brands that we have. And then that vision, I think, is just going to continue to build momentum over time. So I think as simplistically as that structure exists, that's what I hope investors take away.

Great. Mark, Mick, thank you very much. Thank you all for joining us.

Great.

Have a great conference.

Yes. Thanks, everybody.

Thank you.