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

Please welcome to the stage Rebecca Gardy, Campbell's Senior Vice President and Chief Investor Relations Officer.

Good morning, everyone. Thank you so much for coming. Welcome to Campbell's fiscal '25 Investor Day. It is my honor to be here representing one of the most iconic and trusted names in the food industry. I hope that when you leave today, you'll leave with a much greater appreciation that while we have an incredible history, what's ahead is even more exciting. For those listening online, we are coming to you live from Nasdaq MarketSite in New York City. As announced a few weeks ago, we transferred our listing exchange to NASDAQ, joining many of the world's most successful and innovative companies. While we're looking forward to our new relationship with NASDAQ, the NYSE was our listing home for many, many years. And on behalf of Campbell's, I'd like to thank the New York Stock Exchange for its partnership. Before I provide an overview of today's program, a brief reminder that today's presentation and the Q&A session, we'll be making forward-looking statements, which include risks and uncertainties. For factors that may cause outcomes to differ materially, please take a moment to review the slide shown here. It's my favorite slide. Additionally, during today's presentation, we will be using non-GAAP financial measures. We've provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the appendix of today's presentation, which will be available on our Investor Relations website at the conclusion of today's program. Presenters today are Mark Clouse, Chief Executive Officer; Carrie Anderson, Chief Financial Officer. Also presenting are Chris Foley, President of Snacks; and Mick Beekhuizen, President of our Meals & Beverages Division. Dan Poland, our Chief Supply Chain Officer, will also join us for the Q&A session. Now let me review today's agenda. In a moment, Mark will review Campbell's transformative journey over the last 5 years, including the strong results that we've delivered. He'll also outline our future growth strategy and update our long-term algorithm through fiscal '27. Next, you'll hear from Chris Foley, who will share the ways that Snacks will reach its full potential by driving continued growth and profitability with its best-in-class brands. Following Chris, will be Mick Beekhuizen, sharing our strategy to transform meals and beverages by igniting growth in the core business as well as discussing the game-changing addition of Rao's to our portfolio. We'll take a 15-minute break after Mick, but stay close by, please, because our exciting innovation showcase will begin at approximately 11:15. For our online viewers, we'll pause the webcast after Mick's presentation. We'll be back about approximately 12:30 p.m. with Carrie Anderson, who will bring all of the pieces together in a long-term algorithm, also discussing our approach to value creation, our cash flow expectations, and our capital priorities. We'll then move to a Q&A session, which I will moderate. [Operator Instructions] We will get to as many questions as we can before we wrap at approximately 2:00 p.m. If we can't get to your question today, we will follow up with you as soon as possible. And as always, your questions are always welcome by sending me a direct e-mail or an e-mail to [email protected]. And with that, it is my distinct pleasure to introduce our CEO, Mark Clouse.

Good morning, everybody. Great to see everyone. Thank you guys for making the trip. I know many of you are probably a block or 2, but that was part of the goal. And welcome to the Las Vegas Sphere of financial markets at NASDAQ. We're excited to be here today. So I'm Mark Clouse. I'm the Chief Executive Officer of Campbell's. It's great to be speaking to you from NASDAQ in New York City for my third Campbell's Investor Day. Nasdaq MarketSite is a perfect venue to tell you the transformative story of Campbell's and our vision for the future. I've been leading this incredible company for nearly 6 years now. And during that time, we've accomplished a tremendous amount. But more than what we've accomplished, I'm even more thrilled to share with you why we believe this is a unique and breakthrough moment for Campbell's to launch the next chapter of growth in our long and rich history. Those who are new to the Campbell's story, as a company, we generate nearly $10 billion in sales with over 14,000 colleagues across North America. We operate 25 manufacturing facilities and well over 1,000 warehouses and depots. We're located right down the road in beautiful Camden, New Jersey, which has been our headquarters for over 155 years. For the last 6 years, we've been on a transformative journey to redefine our 155-year-old company, and we've made significant progress to achieve that goal. This journey also happened to coincide with perhaps the most volatile period in the food industry's history. So today, although we recognize we remain in a somewhat dynamic consumer environment, we're ready to turn the page on turnaround, fixing and stabilizing. Today marks a new chapter for Campbell's. We're ready to compete like never before, and we believe we are uniquely positioned to set the standard for performance in the food industry. We hope that by the time we conclude today, you'll have the same conviction we have about the undeniable strength of our brands as well as our ability to deliver our long-term goals. As we progress through the day, we'll lay out compelling reasons to believe in our investment thesis, which we are confident will resonate with each member of our audience and a variety of investment objectives. So let's get started. [Presentation]

Awesome. So I was going to sing the Imagine Dragons when it didn't come up. I'm not sure that would have been as enjoyable. But if I've learned nothing else in the 6 years, be ready for a curve ball or 2 that comes your way. But look, I hope you enjoyed that. And when I think about this and I think about this company, it is awesome. I think it would be difficult to find any other food company in the world that has this many industry innovators. Campbell's was built by entrepreneurs, by leaders in food, and by people who were not satisfied with the status quo. From Dr. Dorrance's invention of condensed soup to bring value, safety and taste to the masses; Margaret Rudkin elevating quality with Pepperidge Farm, so her kids could get a decent piece of bread; and Frank Pellegrino changing the way we think about jarred pasta sauce. All of them visionaries and disruptors in their own right. Combined, they create a powerful heritage that's not only literally in our DNA, but it's also at the heart of the transformation we have been driving. We've set out to establish Campbell's as an innovator and clear category leader, transforming the company and building confidence that we can win consistently. We've thoughtfully and methodically shifted opportunities to strengths and added new capabilities as we've moved from defense to offense. We did this in 3 key areas. First, we transformed the portfolio. Second, we rebuilt the foundational capabilities of the company, touching nearly every aspect and corner of the enterprise. And third, something that can't be achieved overnight, we built consistency and dependability in delivering our commitments. One area we immediately set out to accomplish was to transform the portfolio and shift our focus to advantaged core categories and geographies, where we both have an inherent right to win and that are most critical to fueling growth for the company on the top and bottom lines. Said simply, we got back to what we were good at. As Chris will cover in a moment, snacks categories may be normalizing as we lap several years of outsized growth, but we're confident in the underlying consumer demand for snacking and the ability of our unique and differentiated snacks portfolio to deliver accelerated long-term sustainable growth and an expanding margin that will also fuel earnings. Mick will tell you why it's a great time for our Meals & Beverage categories. As consumer preferences has continued to naturally shift and evolve, we've transformed our portfolio to capitalize on these changes. The combination of the sustained consumer need for value, quality and convenience, paired with increased flavor seeking and cooking and meals, supports the shift back to center store categories and demonstrates that this is not just a COVID phenomenon. When adding Sovos to that story, it helps provide even further confidence in the sustainability of our positive Meals & Beverage story. Next, our brands. In the past, you've heard us refer to our 8 power brands in Snacks. The reality is, we also have a set of 8 power brands in our Meals & Beverage division that are also leaders in their categories. Those 8 Meals & Beverage leadership brands now include Rao's, arguably the best story in all of food. All of these 16 brands are competitively differentiated and the majority hold #1 or #2 market share in their respective categories or segments. Going forward, we'll refer to them as our leadership brands. The combination of that focus in advantaged areas, paired with the breadth of our 16 brands, make this as compelling as any portfolio in all of food. I'll speak more about these leadership brands in a moment. Importantly, as we have consistently said, we love soup. We remain confident that soup can and will continue to be a positive contributor to our growth story. However, given the strength and mix of our portfolio today, our long-term algorithm simply requires soup to remain stable. I hope, though, as you hear Mick walk through our plans, you'll agree that the strength of brands like Chunky, Swanson, Pacific and Rao's, along with our name, say, Campbell's can be a meaningful catalyst for upside to our plans. Second, we've taken significant steps in rebuilding Campbell's execution and capabilities. We've assembled an exceptional leadership team with significant experience from a variety of different businesses, all proven builders of winning cultures and committed to a relentless focus on execution. We've rebuilt from the ground up our innovation capabilities, playing a critical role in our success. We have also made significant progress on building our supply chain network of the future. And although we're always looking for continuous improvement, today, we see our supply chain organization moving from an opportunity area to a clear competitive advantage. Finally, we prioritized and reestablished our committed focus on being our retailers' most strategic, collaborative and impactful partner. And finally, we have been steadily building the trust of investors by consistently delivering on our commitments, while also outperforming many of our CPG peers across many critical KPIs. We've also reoriented our focus on winning in market, making market share not just a goal, but directly influencing our performance compensation across the company. This combination of financial and in-market progress has fueled strong value creation for our shareholders, but still with room for much more. Our readiness as a company to take the next step forward could not be coming at a better time. Following several years of unprecedented volatility, driven by global pandemic, generational inflation, economic uncertainty, I am incredibly proud of the remarkable progress we've made as a team to fundamentally transform and reposition the company for long-term success. So as the consumer and industry stabilize, we're ready. And whether it's this quarter or next quarter, it is coming. So it's time for our next chapter. A chapter where our strengthened team, transformed portfolio, and rebuild capabilities are positioned to win and win consistently. What better way to mark this next chapter than with a subtle but meaningful change in the name of our company, one that respects our heritage, but also reflects who we are today, the Campbell's company, a name that celebrates soup. In fact, the name, font and color match our iconic red and white soup can. And as I said earlier, we will always love soup, and we'll never take our eye off of this critical business. But today we're so much more than soup. So at this year's annual meeting of stockholders, we will be asking our shareholders to approve changing the name of the company to the Campbell's Company. Now it's far from the biggest news of the day, but it sends a strong signal for the next chapter in the company's future. We want all 16 of our leadership brands and all of our employees to see themselves in the name of the company, all born of an unmatched heritage of innovation and leadership. So transformed business, an organization with a new name, all that's left is to add a new mission. Simple, aspirational and measurable, set-the-standard. This is a notable shift from turnaround or simply marginal improvement. It changes our orientation. It requires us to measure ourselves not against small incremental improvements year-to-year, but rather against those companies that are best-in-class in our industry, striving to reach those standards and eventually set the standard ourselves for execution, performance and consistency. Although we've already made significant progress against this mission, we realize there remains much to do and accomplish ahead. To achieve this, we've built a framework with 5 pillars: top team, best portfolio, winning execution, top-tier performance, and lasting impact. Everything we do begins with our people and our culture. So let's start with our top team. We pride ourselves on being a company that focuses on building a culture of performance, developing our people and attracting best-in-industry talent that's accountable and committed to our values. I'm lucky to work with such a world-class leadership team each and every day. This team boasts both the breadth and the depth of experience needed to set the standard for performance in food. With an average of 20 years of experience in CPG and food, it represents a healthy balance between Campbell's veterans and complementary external experiences. This leadership reaches well beyond Campbell's top executives. In recent years, we've added outstanding talent and highly accomplished leaders across all our functions, businesses and locations. Most recently, we've added yet another collection of tremendous growth experts with the addition of the Sovos team. Our entire management team is committed to building a top-tier company with best-in-class capabilities, leadership and culture. Throughout my career, I found that the great differentiator for success is strength and depth of leadership. That's why Campbell's is focused on enabling employees at all levels of the organization to have world-class and best-in-industry leadership development resources and programs. So what better way to position us for sustained success than to become the premier destination for developing leaders in the food industry. In addition to strong leadership, we're committed to developing best-in-class capabilities, and we've made significant progress in areas like innovation and marketing, technology and automation, revenue management, analytics, and making a priority the ongoing development of all of our team. I've often wondered over the years why investors don't ask more often for an organization's alignment and engagement scores. It's something that almost every company does on a regular basis. Why? Because winning starts with team alignment. With the team being clear on the company's objectives and their specific roles in achieving those objectives, as well as an employee engagement, which measures their commitment and motivation to achieve our goals. Today, we have an impressive 86% of the Campbell's team that feel they're aligned with the organization strategy and objectives and 84% report high levels of engagement. Both of these scores are above top quartile benchmarks, but getting over 90% would truly set the standard. So let's talk for a moment now about the transformed Campbell's portfolio. As I previously mentioned, we're also introducing a new framework to talk about our portfolio, which is found in over 90% of American homes. We now have 16 leadership brands, which span across both our Snacks and Meals & Beverages portfolios. This reclassification will help better provide an enterprise perspective on scale and focus, while also harmonizing how our divisions talk about their most important businesses. In Snacks, our leadership brands represent approximately 83% of our total snack sales. They include favorites such as Goldfish, Pepperidge Farm, Cape Cod, Kettle and Late July, just to name a few. In Meals & Beverages, our leadership brands represent approximately 85% of total division sales. They include iconic pantry staples such as Campbell's, Chunky, Prego, and more distinctive premium brands such as Pacific and one of the newest additions to the Campbell's family, Rao's. In our 16 leadership brands, we also already have $3 billion brands: Campbell's, Goldfish, and Pepperidge Farm. Each generates more than $1 billion in sales annually. And this gives us critical category-leading brands that are important not just to consumers, but customers as well. And we've got a fourth on the horizon, Rao's. Rao's is a remarkable success story in today's food industry, and we're excited to welcome the brand to our portfolio. We have strong confidence in its long-term growth trajectory. And you'll hear more about that from Mick in a moment. Our leadership brands have truly been on a journey. In fact, using today's framework, in 2017, they would have represented only 60% of enterprise sales. Today, combined, our leadership brands represent 84% of enterprise sales comprising approximately 95% of Campbell's segment operating earnings, while holding #1 or #2 market share in 10 out of our 13 relevant categories, while growing at 6% on a 5-year CAGR. Focus is extremely powerful, but being well-positioned to meet consumer needs is even more important. So perhaps more impressive is the clear linkage of our brands to the largest macro drivers for consumers in food today: value, versatility, high-quality elevated experiences and flavors, as well as greater permissibility. We can see that relevance in the outsized growth in the 13 categories we compete in, which have been growing 4% faster than total food. This distortion to faster-growing categories is helpful in ensuring we can deliver projected growth trajectories and outpace less advantaged portfolios. Now one area I'd like to just spend a moment on is how we view GLP-1's impact on our brands and business. Although today, the extent of impact is still somewhat to be seen, it has not precluded us from learning more about consumer behavior and how to position our portfolio in a scenario where there is more impact. By studying consumer panel data from groups using this class of drugs, we've learned 3 key things: First, efforts to meet nutritional needs encourage consumers to look for nutrient-dense products, particularly in terms of protein and vitamins. Next, in an effort to minimize or prevent gastrointestinal side effects, consumers are more likely to choose foods that are easier to digest. Finally, snacking and moments of indulgence do persist for most individuals. In those moments, more permissible smaller portions are consumed, but consumers are more likely to seek more elevated experiences, flavors and quality to make the most of these occasions. We believe our current portfolio is extremely well positioned for these behaviors, and we see opportunities for innovation within our areas of expertise. On soups and broths, we offer nutritionally dense options, great satiety at a relatively low caloric level, with many also easy to digest. V8 is also a great complement by filling gaps in vegetable intake. We also see our liquid and portable or handheld platforms such as our handheld sippable soup cups as ideal for adding great taste, nutrition, and ease of digestion, as well as an opportunity for future innovation. Additionally, our snacks, with permissible indulgence, elevated flavors and cleaner labels, align well with consumers seeking to maximize their snack moments. A handful of Goldfish to bridge a meal, a 2-pack of Milano's can satisfy these moments. We'll remain vigilant and proactive to ensure we can help consumers if that need grows. So while our leadership brands comprise the vast majority of our sales, our scale brands play an essential role within Campbell's portfolio, providing us with important scale and price points to help complement and strengthen our category positions. Moreover, these scale brands contribute to enhanced cost synergies, which improves our underlying profitability. We'll always need these important brands, but we will continue to make thoughtful decisions in areas like Snacks' partner brands and other non-core category brands to ensure our focus is where it drives the greatest value to our business. We feel great about the composition of our portfolio today and have strong confidence in delivering our algorithm with our current brands, but we'll also continue to evaluate acquiring new tuck-in assets to enhance our underlying growth profile. We maintain high standards for acquisitions, and we'll continue to deploy a disciplined approach in our process, which has been key to our most recent successes. When evaluating new opportunities, we apply a strategic framework to help us decide which acquisitions make the most strategic and economic sense for us to pursue. Our focus is on acquisitions that are in core or near in adjacent categories, quickly accretive to earnings, easily integrated, and allow us to maintain target debt levels and other capital priorities. For example, our recent acquisition of Sovos Brands checked these boxes, allowing us to quickly integrate this acquisition into our portfolio and contribute to Campbell's underlying growth. We will remain focused on attractive areas like premium elevated growth brands in existing categories, better-for-you snacking and authentic ethnic brands. The next pillar in our set-the-standard strategy is winning execution. As we move to a more stable consumer environment, our success will increasingly depend on outperforming competition. With our transformed supply chain, stepped up innovation capabilities, strong retailer relationships, and access to new and evolving technology, we've never been more prepared to outplay competition and win in market. Transforming our supply chain has been a top priority over the past couple of years. On the operational side, we've implemented Campbell's way of working, which we refer to as CWOW, across the network to provide one consistent and proven playbook for maximizing capacity and efficiency. We've optimized our network from farm to shelf by strategically arranging our manufacturing and logistics footprint to best serve our business today and into the future, enhancing both service and reducing cost. This process involves some tough choices to reconfigure, close or consolidate less effective or efficient plants and warehouses. Also, as part of this effort, we've better integrated our external manufacturing partners to further elevate our capabilities. We've also aggressively improved our logistics and route-to-market capabilities. And finally, we've introduced essential technology and automation to refresh and modernize this network, boosting visibility and connectivity to our commercial teams and retail partners. We're proud of this progress and what it means for us going forward. But I'm sure I am not doing it justice. So I thought we'd take a look inside our plants and hear directly from Dan Poland, Campbell's Chief Supply Chain Officer, and our leaders on the ground, on how we've transformed this critical capability. [Presentation]

Great. So it's great to see how Campbell's way of working resonates with our teams on the plant floor. They have greater visibility and actionable information. And everyone at the plant is on the same page as to what needs to be done, and I love this line, you heard it in the video, "to win the hour, win the shift, and win the day". That knowledge and sense of empowerment drives performance and is the true embodiment of set-the-standard mission. Now let's turn to innovation. So many food companies these last 5 years were required to shift much of their focus to supplying the base business and navigating inflation. This was true for us as well, but it did not slow down our efforts to improve our innovation processes, build consumer insights, and enhance our capabilities. We've begun to see the fruits of this labor. This past year, we moved from our more recent 2% of growth contribution to innovation to over 3%. Although good, this is still on the lower end of the industry standard of 3% to 4%, but we have a clear line of sight to best-in-class levels. Looking to the future, with over $1 billion of innovation in our current pipeline, we continue to view innovation as a meaningful catalyst of growth across both divisions. In fact, we expect a 4% innovation target appropriately set at the top end of the industry standard. More specifically, on Snacks, where innovation is more critical and competitive, we're targeting 4% to 5% of net sales, while we expect Meals & Beverages innovation to be at 3% of net sales, on the high end of the industry grocery standards of 2% to 3%, as we continue to support the convenience of cooking, add flavor news, and integrate Rao's impressive innovation pipeline. So get ready for new platforms and more news. Just like we've shown with Kettle Air Fried, Goldfish Crisp, and Chunky Spicy. New-to-the-world ideas like the intersection of popcorn and pretzels with Snack Factory pop-ups, yes, pretzels and popcorn, you'll taste it, you'll get it. And also adding to the success of limited time offers like Old Bay Goldfish to more of our brands and adding incremental purchases and excitement across our categories. Get ready to dial up flavor with coconut, white chocolate Milanos to Carolina Reaper Chunky Soup for the brave at heart that will get to taste it today. We'll also be adding even more elevated experiences. Remember when we all thought, no way a $9 jar of pasta sauce could be an everyday item, but it is, and it provides great value, especially when consumers compare it to ordering mediocre Italian dinners online for $30. And there's likely room for even more elevated experiences. How about Rao's white truffle sauce for dinner tonight for an even more premium experience? And this is only the beginning of accelerating our innovation engine. One of the other areas that I'm most proud of is the progress we've made on returning focus to being the most impactful partner for our retailers. In a highly competitive and complex world, strong retailer relationships not only help us be a better strategic partner, but also pave the way for faster growth and improved execution to meet consumer needs. Over the past couple of years, we've enhanced our dedicated sales team for each of our divisions, ensuring the right skills and capabilities are applied to these different businesses. This important investment also provides our customers with dedicated support and fit-for-purpose resources to drive collaboration, while allowing us to unite under 1 Campbell's voice for major opportunities or top of the house dialogues. We've also upped our game in shopper marketing, consumer insights and retail data, using analytics to fuel decision-making and investment. We're living in a period where the lines between sales, technology and marketing are completely blurred, requiring new skills at a far more dynamic and integrated approach. We must fully embrace this concept by providing new technology and empowering our teams to move in sync with consumers and retailers. Finally, we've invested in route to market and DSD to enhance our delivery speed, further supporting our goal to stock the right product, in the right channel, at the right time, to reach the right customer. You'll hear more about that when Chris speaks later today. The steps we have taken have transformed our reputation and strengthened our relationship with our retail partners. The combination of our investment, category leadership, and performance has led to real progress, moving us from the bottom of retail ranking to consistently now being in the top 10. And while we're pleased with the progress we've made, we're not done yet. We want to continue to build on what we've accomplished to become truly the #1 supplier across both Meals & Beverages and Snacks. We have the right strategy in place to accomplish this, and we know we share many aligned objectives with our customers, like winning in-store and online in an ever-growing omnichannel world, and we're strategically investing in that model by leveraging our capabilities and consumer insights. Also, since our last Investor Day, we've made many investments to strengthen the technology foundation of the company. By focusing on data strategy, reinforcing and enabling real-time integration, cloud migration, advanced analytics and generative AI, we've added enterprise-wide linkage and harmonization, empowering digital leaders with improved connectivity and making insights-based decisions more of the norm. Translating new technologies into tangible impact and staying focused on real-world applications is really the focus of our technology agenda going forward. So by leveraging our top team, our portfolio of best-in-class brands and operational capabilities, we will deliver top-tier results consistently. We are confident in our ability to generate strong earnings growth through a variety of different levers with plenty of self-help remaining, and our significant free cash flow generation fuels our disciplined capital allocation strategy and creates exciting optionality. With our new framework, we're updating our long-term targets. Our objective is to deliver highly predictable and sustainable top-tier results that represent a balance of pragmatism and ambition. In plain terms, we've created road maps at the high end of our algorithm and then built in contingency and flexibility to create greater confidence for us to continue our track record of consistently delivering expectations. I'll introduce the updated long-term algorithm and then Carrie will elaborate on the drivers behind each of these metrics later on. First, we expect to grow organic net sales at approximately 2% to 3%. This reflects historically consistent 3% to 4% average annual growth rate on our Snacks business and a modest move up to 1% to 2% per year on average for our Meals & Beverage business given the addition of Sovos Brands to the portfolio. Our long-term adjusted EBIT algorithm remains at 4% to 6%, fueled by sustainable growth on top line, but also a variety of areas for enterprise and division-specific initiatives to drive faster bottom line and margin expansion. This plan also creates appropriate space for investment and some room for the unexpected. Finally, as we continue to delever our balance sheet, we expect to deliver adjusted EPS growth of 7% to 9% through 2027. Following that period, adjusted EPS shifts to modestly ahead of adjusted EBIT growth rates. Our final strategic pillar is about the trust that Campbell's has built over the last 155 years, and how it is a unique and valuable asset. When you really think about the reasons people buy Campbell's products, it starts with trust. And I'm proud to highlight that we're once again named among the very top most trustworthy food and beverage companies. Earning the trust of our consumers, employees and investors is paramount to us, and we'll continue to work hard every day to maintain the trust of all of our stakeholders. Nurturing strong community relationships and ensuring we care for the planet is also part of Campbell's DNA. And we've implemented a comprehensive environmental program that builds on Campbell's legacy of positive and measurable impact that's aligned with today's high expectations and responsibilities. We've continued to focus on key pillars crucial to our company and stakeholders, where we aim to achieve tangible and measurable business results. So to wrap up, for many in the room or watching online, you may have arrived today with a view of Campbell's from a historical perspective, where much of our time and energy were focused on explaining how we're fixing, improving or turning around the business, where you might have justifiably concluded, let's take a wait-and-see approach. My hope is that you will leave understanding today that we're a much stronger business than we were 5 years ago. Make no mistake, we're well aware that we cannot claim full victory, and that our journey of improvement and transformation continues. However, we believe today is the day for a new Campbell's, an opportunity to reframe its goal and reposition our ambition from those important years of turnaround and instead aspire to set the standard. A new chapter built by our leadership brands growing faster than the advantaged categories in which we compete, a new chapter fueled by strong capabilities and executing with excellence, a new chapter with multiple levers for earnings and margin expansion, while maintaining our history of best-in-class long-term cash generation. We have a balanced and deliverable investor proposition with an achievable but still ambitious long-term growth algorithm. And all of this puts Campbell's on strong footing to create significant and reliable value for shareholders. Today is the day. Now let me turn it over to the rest of the team to share more detail exactly how we're going to set the standard. And first up is Chris Foley to share the plans for our Snacks division. Chris, all yours. [Presentation]

Thank you, Mark, and good morning to everybody in the room. Good morning to everyone listening online. My name is Chris Foley. I'm the President of our Campbell's Snacks division. What an awesome video to get it started. I'm thrilled to be here with you today to talk more about our Snacks division and the confidence that I have in unlocking our full potential. As a category leader in snacks, we believe in continued long-term growth and margin expansion. First, as Mark talked about, our leadership brands are uniquely elevated, differentiated from competition, and they all play in advantaged, attractive categories. Second. We in Campbell Snacks and our team are best positioned to keep driving snacking growth and evolving our portfolio. Third. We're delivering industry-leading innovation like Goldfish Crisps and Kettle Brand Air Fried. I believe this, coupled with unlocking the potential of our independent DSD network, puts us at the forefront of the industry. Finally, we're confident in our dual growth and margin expansion model. This approach will enable us to deliver top-tier growth, while expanding margins to fuel that investment. As Mark mentioned, the snacking industry is experiencing temporary headwinds following years of significant growth. The pace of normalization is being impacted by financial strain, especially in the middle and lower income households. We see a clear bifurcation of consumer behavior with continued growth in premium segments and increased trade down to the value options. In the current economic environment, consumers are evolving the discretionary spend, that has put recently pressure on some of our larger snack segments. The categories are, however, now showing more volume recovery, as pricing wraps suggesting better momentum in the snacking market. Consumer snacking trends continue to support outsized growth going forward. Snacking now accounts for half of all eating occasions and millennials and Gen-Z are 2x to 3x more likely to replace meals with snacks. In fact, 70% of consumers had a snack in just the past 24 hours, and I know every person in this room has. There are 3 major trends driving long-term and sustained growth. The blurring of snacks as meals, evolving convenience demands, and a significant generational shift in the snacking habits. These aren't just fleeting trends, they are macro shifts, and it's this change in eating habits that will continue to reshape the entire snacking landscape. The 8 snacking categories in which we compete have shown consistent growth over the past 5 years, even as many segments were slowing down. All categories show a positive 5-year CAGR, indicating industry-wide growth. Pretzels leads with an impressive 11% CAGR, followed by Kettle Chips at close to 8%. Crackers represents our largest category share at 23% of the Campbell's Snacks business. Our breadth and scale across salty, cookie and cracker are assets for us. We use them to build winning strategies. Let's dive into where the growth is coming from in snacking in this past year, and why we believe we're so well-positioned to be a leader. Value-branded snacks accounts for just 9% of total share, but they're driving 28% of growth as consumers are making more price-driven decisions today than previous periods. This is putting the most pressure on the mainstream segment, where there is more vulnerability to price. Most importantly for Campbell's, premium snacks make up 36% of total share in branded snacking, but accounts for over half of the growth in the sector. So although we see some trading down pressure, the majority of our portfolio remains in very strong categories and segments. Our strategy of focusing on premium and differentiated offerings aligns with where we believe the market is heading and sets us up for continued success. Campbell's Snacks has strengthened its position to set the standard for snacking growth. The uniqueness and differentiation of our portfolio lies in the power of our brands and also in our winning execution. We've made significant strides. We have elevated leadership brands that are absolutely winning in the market. We've streamlined our set of partner and contract manufacturing businesses to focus on our core strengths. We've delivered several -- excuse me, we've divested several noncore businesses to sharpen our focus. In terms of our winning execution, we are seeing significantly higher share of net sales from innovation platform launches. This has doubled in the past 3 years. We've also improved our DSD and route-to-market efficiency on multiple fronts. Our dual growth and margin strategy is proving effective. This is evidenced by the 5% annual growth and 150 basis points expansion in operating margin that we've delivered since our last Investor Day 3 years ago. We're very proud of these results. Let's take a look at our portfolio. Our strength lies in the diversity, quality, and presence of our brands across multiple snacking segments. Our leadership brands hold the #1 or #2 market share position in their respective categories or segments, and all brands show positive 5-year CAGRs ranging from 4% to 9%. While we have many great brands in Snacks, Goldfish accounts for 1/4 of our entire portfolio and the story is incredible. I have a prop. I need to break it up a little bit. This is the product we're talking about, Goldfish. As Mark highlighted earlier, Goldfish has achieved billion-dollar brand status. Looking at the period from fiscal year 2019 to fiscal year 2024, we've seen substantial results with 50% net sales growth in just 5 years. We've transformed this brand from a kid snack to an all-family snack. For the fifth year in a row, Goldfish is the #1 favorite snack amongst teens. Looking at household penetration, our all-family households grew by 1 million households in just this past year. And importantly, those Gen-Z households gained significant household penetration 6x faster than the total rate of our all-family. Innovation has been the key growth engine for Goldfish. We're delivering 2x the innovation dollars versus our closest competitors. We're creating consumption occasions and attracting new consumers with extensions beyond the core. We've built compelling brand partnerships to bring Old Bay, Frank's RedHot, Hello Kitty to life with Goldfish. We have innovations that combine our expertise in multiple categories with winning platforms to expand our market presence. A standout example of this is our new Goldfish Crisps. This is one of our largest innovation launches in recent history. It's projected to be north of $75 million this fiscal year. We combine the iconic shape of Goldfish and the craveable quality of chips. It's how Goldfish does chips. If you haven't tried these already, you will today in our innovation showcase. Goldfish is a true brand icon with the U.S. as its largest market, but we really think about Goldfish across total North America. In our most important market, the U.S., we're fueling core Goldfish with over 30 varieties from unique limited-time flavors like spicy dill pickle to classics like Mega Bites. We continue to find new ways to satisfy snackers of every age with craveable moments, cultural relevant activations, and retail execution. In fact, today, Goldfish makes its New York Fashion Week debut with Designer Kate Barton as part of her collection. Additionally, in the U.S., we aim to boost Goldfish's presence and brand exposure by leveraging our Away From Home business. We saw a strong 13% increase in North American foodservice in our net sales compared to the previous year. North of the border, in Canada, it's a fast-growing market for Goldfish. The pace of growth is nearly double that of the total cracker category, and we are outpacing all our competitors. Our strategy there is twofold: Extend into new occasions and channels mirroring that U.S. successful playbook, and age up our consumer base through targeted innovation and communication. Goldfish gained 0.5 point of share in fiscal 2024 and is on the verge of being the #1 position. This is outstanding growth, and we're set to accelerate it more in Canada against this trend. In Mexico, I'm very excited to share that we are launching the Goldfish brand in a big way. We'll be doing this with strategic investments to drive trial, launching a locally relevant portfolio with both sweet and savory Goldfish, and additionally, we will be working with a long-time partner, La Costeña, to broaden our distribution into multiple outlets. Goldfish is set to become a major player in Mexican snacking and it's a natural extension of our current footprint. In total, we're targeting net sales of $1.3 billion by fiscal '27, making Goldfish the single largest brand in the Campbell's portfolio. When you look back to 2019, we're on course to double this brand in 10 years. This is an incremental -- this is not incremental progress, this is exponential expansion against our single strongest brand in Snacks. Now as you've heard from our recent earnings call, the competition in salty snacks is increasing. We do not see a structural concern around the health of these categories as they continue to grow faster than total snacking, but we do see a share fight. We're executing our growth strategy through 3 key pillars. First, it's about our food, elevated food, delivering superior taste and quality experiences. Second, innovation, platform innovation, continuing to introduce breakthrough and new-to-category flavors and better-for-you formats. And third, continuing to build that worth into our value proposition as we expand our availability. Let's take a closer look at each of the categories in salty and our plans to play offense in these competitive segments. Beginning with pretzels. In pretzels, we have a bold multi-brand strategy that will drive greater brand distinction to win in all pretzel occasions, and it's going to grow beyond what a pretzel is. Our pretzel segment is fueled by Snyder's of Hanover, the market leader; and Snack Factory, which is #1 in the deli aisle with its highly successful Pretzel Crisps line. For Snyder's of Hanover, we plan to restage the packaging and graphics to contemporize the brand and make our many segments easier to shop. For Snack Factory, as a brand, it has challenged boundaries on what a pretzel can be since day 1, rethinking the definitions and attributes to create new-to-the-world pretzel-like snacks. We first started with our base crisps, which is a pretzel take on a cracker. Then we introduced bites, a great example of expanding into unique pretzel forms. And now, as Mark mentioned, let me introduce you to pop-ups. Imagine the perfect intersection of pretzel and popcorn, or how Snack Factory does popcorn. This kind of innovation truly sets us apart, and I can't wait for you to try all 3 flavors over there today. We will continue to lead in the deli aisle with best-in-class execution, and we have for years, but we'll also grow in the pretzel aisle with a placement of pop-ups and bites. And this gives us a unique multi-aisle positioning across pretzels. In chips, we're leveraging a powerful dual brand approach with the Kettle brand and Cape Cod, each offering premium differentiated positionings. Historically, these brands have tended to be more regional in nature, but we plan to flip that script as the segment continues to grow. The most compelling offering is when these complementary brands are on the shelf together. Kettle brand focuses on bold, unexpected, innovative flavors, while Cape Cod celebrates sophisticated simplicity of making the best classic, high-quality potato chip. Our commitment to innovation is on both, driving growth through delicious new flavors and retail exclusive partnerships. We're launching Tuscan Herb infused and truffle-infused chips from Cape Cod, playing to that simple sophistication. On the Kettle brand, we're expanding our successful Air Fried Kettle Brand chips with additional authentic flavors like Texas barbecue. For tortilla chips, the Late July brand operates in this sweet spot of wholesome summer afternoon in the backyard with fresh clean ingredients and bright delicious flavors. We'll focus on building our craving flavor-forward platform and also dialing up our marketing on all. A great example of this is our Hawaiian Habanero or Mexican Street Corn, unique and very special products. We'll also look to expand our scale and our stronghold, doing so through execution, distribution and many, many new pack sizes. It's important to remember on Late July, our journey around margin improvement as well, and we'll do this through production, pack and mix. And then there's Pepperidge Farm, founded on the premium quality and entrepreneurial spirit of our founder, Margaret Rudkin. We focus on indulgence and quality across our cookie and bakery lines, and it has been the cornerstone of our Campbell's Snacks portfolio since 1961. Its exceptional positioning makes it a true gem in our portfolio. As our second billion-dollar brand, Pepperidge Farm continues to carve out unique, elevated, and indulgent position across all baked goods. Margaret's simple vision of not requiring consumers to sacrifice, to get great taste and quality will continue to be at the heart of our strategy, and it's squarely in premium. There are a few areas we will continue to go after to grow share and growth on our Pepperidge Farm business. These include accelerating innovation by leaning into indulgence and permissibility with amazing new products like our new White Chocolate Milanos and Pepperidge Farm Brioche Rolls. Owning the holiday, where the moments matter the most, with disruptive limited time offers, displays, and holiday favorites, and scaling our big activation to build momentum with millennials, including a very successful Have a Little Taste Campaign with Hannah Waddingham. A brand that always doesn't get as much airtime in our portfolio is Lance. As the market leader and growth leader, Lance boasts impressive share, loyalty and velocity results, backed by the broadest assortment from sweet to savory. We're continuing to modernize Lance to keep its loyal fan base and fuel its relevance with new consumers. This means innovating for the pantry and the on-the-go occasions through pack formats, introducing new fillings, new cracker varieties, and applying our successful limited time offer model to keep things exciting. Now I'm going to transition from all of our leadership brands to look at the overall makeup of our portfolio. When we go back to the acquisition of Snyder's-Lance in our fiscal 2019, we were sitting at approximately 72% of our portfolio in leadership brands with the remaining 28% in our scale brands. Within these scale brands, we had a complex network of over 120 partner brands that totaled only $300 million in sales. For context, these are third-party brands that we do not own, but we put them on the trucks to drive scale when servicing stores in certain regions. We also acquired a number of contract manufacturing businesses that we were running in our plants. These businesses played an important role at the time for scale, but were generally margin-dilutive and for some, competitive in nature. Our intent from the beginning of Campbell's Snacks has been to build a portfolio positioned to win through growth. We increased our share of leadership brands from 72% in fiscal 2019 to now 83% at the end of our fiscal 2024. We grew and built scale in our leadership brands and thus reduced our dependence on partner brands and contract businesses from 120 to around 30 in this latest year. Additionally, we divested nonstrategic brands, like our European chip business, Ecce Panis Bakery, Emerald Nuts, and most recently, our Pop Secret business, to further enhance our focus. While we were pleased with our progress, we still see an opportunity to even further sculpt our portfolio in snacking. Our goal by fiscal '27 is to increase the share of our leadership brands to 88% and continue to optimize and reengineer our DSD routes, recenter our partner and contract businesses for strategic customer engagement and branded benefit, all the while continuing to optimize our subscale businesses and evaluating strategic M&A, as Mark mentioned earlier. Our continued shift to leadership brands importantly will drive accelerated growth, but also margins through favorable mix. We have an advantaged direct-store delivery and warehouse network to fuel growth. In many regions, we have dedicated routes, where we are already at scale with Pepperidge Farm and Snyder's-Lance. We have Pepperidge Farm trucks and Snyder's-Lance trucks that both go on the store and are operating at scale. But where we are subscale, we are continuing to combine and reengineer our snacks routes where necessary. This involves, in certain markets, buying back Snyder's-Lance and Pepperidge Farm routes, combining them, and reselling them as a combined entity. All routes leverage our single integrated logistics and warehouse network. Now we can really focus on execution and optimizing our advantaged network for faster growth and savings. Where we have combined routes, we're off to a strong start. This started in a very attractive growth market for us of Texas. Our results in San Antonio and Austin are very promising, with in-stock rates and service levels up, and the speed at which we've been able to resell these routes is exceeding our expectations. In parallel, we've developed state-of-the-art technology application called STAR to help our independent distributor partners drive growth. This platform helps enable a shift from transactional focus to actionable insights, empowering independent distributors with real-time data to service customers, make faster decisions, and drive success with the omnichannel integration that's happening in all of our retailers. Through all of this, we're continuing to simplify our network. Fundamentally, with the goal of taking miles off the road, consolidating our hub and depot network into fewer locations, where we can leverage storing and moving products across Pepperidge Farm and Snyder's-Lance networks. As we look to our Snacks long-term algorithm, we are confident to continue to deliver top-tier results, 3% to 4% annual organic net sales and approximately 17% operating margin. Although I understand the need to definitively deliver 17% margins as quickly as possible, and I'm confident we will, we also have to be appropriately responsive to the market and the competitive dynamics. We have already improved the margins significantly, and we remain right on track with all of our savings plans. We are also accelerating investment in the short term to strengthen our brands and to support our innovation. This balanced approach for continued margin improvements, while remaining competitive, will provide the clarity and pace of this margin expansion as we go forward, and we remain very committed to our goal of 17% no later than 2027. Now as we look at net sales for growth, we are guiding to approximately 3% to 4% CAGR on organic net sales over the next 3 years, coming off a 5% CAGR we delivered on the Snacks division from fiscal '21 to '24. Much of this future growth is underpinned by our leadership brands growing at approximately 4% and eventually reaching 88% of our full portfolio. Now let's look at our operating margin. We're projecting operating margin from approximately 15% in 2024 to approximately 17% no later than fiscal '27, representing just over 200 basis points of further improvement. The pace of this progress will be spread over the next 2 to 3 years. Although the pace of savings remains right on track, we are leaving some flexibility for investment as needed. Our margin expansion strategy is built on brand mix improvements, fundamental efficiencies, and network and route optimization. Then we're planning to reinvest approximately 150 basis points of our gains back into the business through increased advertising and consumer spend, ensuring long-term sustainable growth. Let's take a closer look at the specific assumptions that drive this increase. Let's start with the brand mix. Our leadership brands have a significant margin advantage over our scale brands. As mentioned, we're shifting our focus from 83% to approximately 88% of total net sales. This will contribute 80 basis points of mix coming from margin. On fundamentals, we're targeting 150 basis points of improvement, including 130 basis points from productivity gains, offsetting inflation with robust supply chain enablers. Productivity is planned at historic levels of 2% to 3% with minimal contributions from pricing. There is a small benefit in pricing coming from trade efficiency, improving as we strengthen our revenue management. Network and route optimization is expected to deliver another 140 basis points, with 2/3 coming from our snacks network optimization, scaling our large efficient network, and combining and reengineering our routes, and 1/3 is coming from other supply chain savings and enterprise programs that Carrie will walk through further in a moment. This will also be an area where you see the benefit from our route-to-market work and DSD route reengineering. Finally, on investments, we're reinvesting 150 basis points into marketing and sales to achieve our targeted 9% to 10% of net sales and accelerate our growth of our leadership brands. In summary, as we move into the next chapter, Snacks is very well-positioned to set the standard. I want to take a minute here and thank the outstanding team that works in this division to build these brands, build better food and win versus competition every single day. We also have, quite frankly, the best snacking portfolio in the fastest-growing and advantaged categories, and it's only going to get better from here. We continue to shift our mix towards our leadership brands and grow these advantaged core businesses with best-in-class innovation and unlocking the full potential of our DSD network. We have a dual growth and margin expansion model that will allow us to make the necessary investments to fuel growth for the future. In closing, we could not be better positioned for leading the ongoing growth and momentum in snacking. Thank you for your time today. Now let me turn it over to Mick. [Presentation]

Good morning, everyone. So that video truly represents the level of enthusiasm I have for our business. Today, I want to share with you the exciting transformation story of our Meals & Beverages division. We have made significant progress over the last few years, and there's more incredible work on the way that will ensure this business delivers sustainable, profitable growth into the future. When I became President of the division nearly 2 years ago, it was clear to me that we have a portfolio of iconic brands that are relevant and meaningful to our consumers and customers. With our leading market positions in large and relevant categories, I believe it's our responsibility to act as category leaders to fuel growth. We need to purposefully transform each of our categories through our leadership brands with a powerful combination of strong innovation and engaging marketing, grounded in meaningful consumer insights. I will walk you through some of those efforts today. Additionally, the continued premiumization of some categories has required us to expand our presence. Most notably, with our acquisition of Sovos Brands, we added Rao's to our portfolio, a fantastic brand with continued strong growth potential. I'll talk more about it shortly. We are confident that we can build a compelling growth story within Meals & Beverages. At the same time, as we use some of the synergies from the Sovos acquisition and the savings from the previously announced optimization of our manufacturing network, we also expect to improve our profit margins. I hope that by the end of my presentation, you are as convinced as I am of the potential of this business. The macro environment has and continues to reinforce the importance of the center store for consumers and customers. Most meals continue to be prepared to be eaten at home, which increased by 3 points over the past 3 years to 83%. Driven by increased home consumption and the need for compelling value, approximately 2/3 of consumer spending for food came from the center store, resulting in an average annual growth rate of 7%. Although pricing has been a key driver of growth, volumes have begun to fuel more of the growth in the most recent quarters. I believe that our portfolio is better positioned than ever to meet consumers' needs today and well into the future. Our portfolio of brands operates in 4 attractive categories that are large and highly relevant with representation in almost every home across the country. In fact, all 4 categories are currently growing. We believe that our amazing food, innovation and focus on consumer engagement will continue to bring excitement to each of these categories supporting future growth. Specifically, we believe the Italian and Mexican categories have further potential within both the mainstream and premium segments. I'll elaborate more on this potential in a moment. We are leaders in each of these 4 categories. Each one of our leadership brands holds either the #1 or #2 market position in their respective subcategory. Building on the existing momentum, we're focused on a simple recipe for success, maintain excitement with our consumers through innovation and engagement, while ensuring that our food and beverages are delicious and flavorful. This is crucial to continue to enhance the overall consumer experience and drive traffic into the physical and online aisles of our retail partners. At the same time, the value proposition of our products is critical for the consumer and plays an important role across our portfolio. As a result, you will hear me talk about our portfolio focusing both on mainstream or iconic brands as well as premium or distinctive brands. A little fact to support the strength of our portfolio: Over the past 12 months, nearly 9 out of 10 American households have bought products from one of the brands you see on the page over here. I am confident that we are successfully transforming our division into one of the leading center store CPG businesses. Our focus is on creating best portfolio to win within our categories. And over the past several years, we've also continued to enhance our portfolio with the addition of premium brands like Pacific Foods and Rao's. We continue to evolve to be leaders within our categories with great brands and products, even if that means making tough decisions, such as portfolio rationalizations. We continuously modernize our products to ensure they maintain their relevance for today's consumer. For example, we have evolved our recipes, redesigned our iconic Campbell's condensed soup line, discontinued our Well Yes! product line, and are launching new bold flavors and designs such as our spicy soups and broths. At the same time, we also need to continue to execute with excellence. This has required us to step up our marketing and innovation initiatives. The best tasting, most appealing products that attract the most consumers will drive category growth and transform our business. Within all of this, our retail customers play a critical role. And we continue to focus on strengthening our relationships to build true partnerships. Overall, we have a portfolio of 8 advantaged leadership brands that participate in large, highly relevant and growing categories, providing a solid foundation for a long-term growth algorithm within Meals & Beverages. I will now review each of our key businesses in more detail. Soup and broth play essential roles in the age-old dilemma of what's for dinner. Consumers continue to look for quick and easy cooking solutions. Our brands used in easy recipes with ingredients they have on hand are cornerstones in making delicious meals. Consumers are looking for more variety and they are willing to experiment with new flavors. As a result, our innovation pipeline is stacked with flavor varieties to spice up their cooking routines. And finally, it's important that our portfolio offers a variety of options that meets the different needs and budgets of consumers. In addition to these favorable consumer trends, we have identified another potential tailwinds, the aging U.S. population. We know that soup consumption is generally higher as the consumer ages. As the older U.S. population cohort grows, we expect the soup category to follow. This dynamic is in complete contrast to the prior decades, where more of the growth was coming from younger consumers. This shift will, of course, benefit us as the category leaders. We are not assuming any of this potential benefit in our long-term growth algorithm, but it does provide us the possibility for additional growth over and above our algorithm. As you look at our portfolio, you see the breadth of our offerings, providing consumers with versatility for lunch, dinner and in-between meals. Our brands are included in millions of meals throughout America, either as a ready-to-serve meal or as a key ingredient in a recipe. We estimate that nearly 50% of our soup and broth portfolio is used as an ingredient. In addition to the value provided by our iconic brands, with the acquisition of Pacific Foods and most recently, Rao's, we have now added distinctive brands that offer premium flavors and experiences. Against this backdrop, we are poised to create the next generation of soup fanatics with a twofold strategy: innovate and engage, with a pipeline of delicious and flavorful innovation to excite our consumers and culturally relevant activations to engage them with our brands. Our innovation pipeline is robust with many new offerings this soup season. First, we are dialing up the flavor across the portfolio with unique spicy varieties across our flagship condensed business in both our eating and cooking products. We are spicing up Swanson broth as well, along with launching our first-ever ramen variety. In our distinctive portfolio, we will expand Rao's presence in the soup category as we elevate the soup eating occasion with our newest brand and launch indulgent new flavors. We also recognized that consumers often see better-for-you options. We are reframing our Healthy Request line to Heart Healthy, while also expanding our gluten-free and lower sodium offerings. Finally, we know that today's consumers are busier than ever. So we want to be sure that they have an exciting, convenient soup product available for nearly any occasion. Beyond product innovation, we continuously develop new and exciting recipes with our products to inspire our consumers, and we're finding creative ways to engage them to amplify our cultural relevance and remain top of mind. We leverage numerous chefs and influencers for their credibility to introduce us to new audiences and to take us into spaces that we couldn't get to on our own. On average, we partner with more than 200 influencers annually chosen for their culinary credibility. They also need to be authentic to the cooking spaces we target and be a strong fit for our brands. All right, I'm not sure how many New York Jets fans we have in the room, but I'm sure you all stayed up last night to watch the game. During the game, we launched our new NFL spot in prime time featuring our Philly hometown hero, cultural icon, and NFL Super Bowl Champion, Jason Kelce. We have an integrated campaign in place that will leverage Jason's cultural relevance to appeal to a fan base that extends well beyond Chunky and the NFL. This is just 1 example of how we're continuously working to amplify and build the equity of our brands. In summary, we are very excited about what we have in store. Confident that the combination of robust innovation, great tasting food and compelling marketing will create the next generation of soup and broth fanatics. Our ambition is to grow soup moving forward, but it might have surprised you to hear that given the strength of our transformed M&B portfolio, we only need the business to be flat to deliver a long-term growth algorithm. However, as category leaders, we know we have the responsibility to continue to grow the category, and we believe we will be creating potential upside to our current planning stance. As we move to our sauces portfolio, I'm going to borrow a line from our Sovos Brands team, "Sauce is Boss". Back in December 2021, we shared with you our ambition to build a $1 billion sauces business through a combination of organic growth and acquisitions. We have achieved that goal and more. With the steady growth of Prego, Pace, the launch of Late July Salsa, and most significantly, the acquisition of the best growth story in food, Rao's Homemade. And we're not done yet. There is so much more potential. Meals with sauces create meaningful moments, bringing friends and family together. And as we consider our distinctive brands, consumers recognize the importance of having high-quality ingredients and appreciate its worth. Our sauce brands are well positioned across occasions and price points. When we announced our intention to acquire Sovos Brands, we highlighted the role of our Prego brand and the role of the Rao's brand in the mainstream and ultra-distinctive segments of Italian sauces. We are now implementing this two-branded strategy in both Italian and, as I'll talk to in a moment, in the Mexican category as well. I'm going to talk a little bit more about Prego. Prego is the #1 mainstream Italian sauce, has the highest household penetration among branded players in the Italian sauce aisle, and the highest purchase intent in the entire Italian sauce category. Our Prego plan is to expand its presence through innovation and offer compelling choices to augment mainstream red sauces in the aisle. We're excited about our 3 new creamy pasta products, as this is a small but growing segment within the Italian category. We expect that these great-tasting varieties featuring real basil and fresh cream will drive incremental occasions and enable us to own more dinner moments. The growth of the Alfredo segment is currently outpacing the category. In response, we have improved the quality of our Alfredo varieties and are confident our new recipe will increase appeal to our consumers, while we also introduce new flavors within white sauce. Finally, we are launching pink sauces like spicy vodka. In a world where pasta and sauce continue to be a household staple, we are bringing fun and flavorful innovations that will add variety and excitement to the dinner table. It also will bring excitement and growth to the category, and we are confident in our ability to keep this brand's momentum going. Speaking of momentum, our newest portfolio addition, Rao's, is a brand that has redefined the Italian sauce category. Having grown revenue dollars 400% in the past 5 years, increased distribution over 100%, and more than tripled household penetration during that time period, simply the best growth story in food. It may be important to take a moment to point out why. First, the recipe and ingredients are as authentic as you could possibly have. In fact, one family in Italy, the Romanos, who I visited last month, make all of our tomato sauce. Their experience, know-how and access to the best ingredients in Italy is the secret in the sauce, and this is also why we're not going to change it. Even with its monumental success, we believe there is more runway to grow this brand in the sauce category. If you look at these 3 basic metrics: Points of distribution, household penetration, and brand awareness, Rao's has so much room to grow as compared to our mainstream Prego brand. We are committed to driving continued success through strategic growth, increased market's reach and brand awareness. We know that the key to growing the Rao's brand is to drive higher levels of awareness. Given the premium sauce category Rao's participates in, our investments are focused on campaigns that highlight the quality, the deliciousness of the sauce, and elevate the weeknight dinner. Consumers turn to Rao's as an accessible, authentic Italian experience, to turn an ordinary pasta night into an extraordinary Rao's night. Our message has been more focused on emotional experiences, and we will soon be introducing new content that will emphasize the brand's attributes like Italian ingredients and our slow simmered cooking process. We will also participate in key cultural moments like the Macy's Thanksgiving Parade, the most watched broadcast in America outside of football, to provide massive reach for the brand. These elements, combined with an effective influencer strategy as well as some help from celebrity fans, will enable us to bring the Rao's brand into more households. We're augmenting this consumer engagement with the launch of several new line extensions to expand reach and drive incrementality. In line with the overall demand for Alfredo sauces, which I mentioned earlier, we plan to expand our Rao's Alfredo flavors. We will also introduce new, even more distinctive premium items, like White Truffle Marinara, to the grocery channel for consumers seeking new elevated experiences. This variety was successful in our direct-to-consumer channel and retail rotational programs. And we believe there is ample white space to experiment with new ingredients and introduce new flavors. As I said earlier, Sauce is Boss. That said, there is clear potential for growth in the other categories which the brand has already entered, including frozen pizza and entrees, soup, dry pasta and other sauces beyond Italian. This expansion outside of Italian sauces leverages Rao's established brand reputation, and innovative approach to continue to expand the consumers' premium Rao's experience, in addition to positioning Rao's as a leading brand across multiple categories. We are excited about the many possibilities we have to expand Rao's. As Mark shared, we are building Rao's to be another $1 billion brand, making it a 2-punch with our Campbell's Soup business in Meals & Beverages. We expect a mid to high single-digit long-term growth rate for Rao's. The assumptions that underpin this growth are relatively straightforward. As we expect approximately 75% of the growth to come from sauce and 25% from adjacent categories such as frozen pizza and entrees and soups. Now let's switch from Italian to Mexican. As I mentioned earlier, we have an opportunity to grow our mainstream Pace brand, along with our distinctive Late July brand. Pace already has a strong presence in the Mexican aisle as the #1 branded player and with the highest household penetration. We see an opportunity to bring Pace to new occasions beyond simply dipping with the launch of our signature sauces as the most recent example. We believe we can expand the brand to younger consumers who are loyal to Pace Salsa, and offer them modern recipes and adventurous flavors, so the Pace brands becomes their go-to choice for an elevated Mexican meal lunch experience at an attractive value. At the same time, we know that the premium salsa consumer has different needs, a subcategory we recently entered with the launch of our Late July Salsa. More to come in this exciting space. I'll touch quickly on our V8 beverage portfolio. While fair to say in a world of a variety of external demands on the business, we need to make decisions on where we focus and V8 did not always make that list of priorities given the strong core consumer. However, as we move forward, we have reactivated resources and focus on this very relevant and unique business. Along with the reengagement of the V8 consumer, we have an exciting opportunity to expand our V8 + Energy brand. I hope that you get a chance to taste it today and continue to look for stepped-up marketing and innovation as we enable V8 to be a solid contributor to our growth going forward. Now let's talk numbers. Our goal is to deliver top-tier results with a renewed long-term algorithm for our division that drives top line growth and profitability. As Mark mentioned earlier, from fiscal '26 onwards, we expect organic net sales growth of 1% to 2% per year for the division. This growth will be mainly driven by our leadership brands, which we expect to grow approximately 2% per year, driven by volume growth. As we mentioned earlier, at the midpoint of our targeted range, we have planned soup to remain flat, while our other leadership brands fuel the growth. In addition to conviction around our top line growth, we have a clear road map to improve our operating margin to 19% by the end of fiscal '27. This equates to approximately 170 basis points of margin expansion when compared to our fiscal '24 pro forma margin. We anticipate fundamental improvements in our operating margin, Sovos synergies, and manufacturing network optimization to more than offset increased investments in our brands. Double-clicking into the margin improvement drivers, beginning with fundamentals, we anticipate 130 basis points of expansion from productivity improvements, partially offset by inflation and other supply chain costs. In a nutshell, we are anticipating that our productivity initiatives will run slightly ahead of inflation in the foreseeable future. As discussed previously, we are on track to deliver the synergies from the Sovos acquisition and are expecting 80 basis points of margin expansion between fiscal '24 and fiscal '27. 2/3 of the cost savings will be from targeted SG&A reductions with the remaining 1/3 from supply chain benefits. The integration is off to a great start and although cost savings are important, our focus is on maintaining top line growth, which I believe is absolutely critical. Additionally, we expect to realize 110 basis points of margin expansion from the manufacturing network initiatives that we have previously announced. With the planned closure of our Pacific Foods Tualatin plant in Oregon, simplification of our Paris, Texas, plant to produce salsa only, and our investments in our Napoleon, Ohio, and Maxton, North Carolina, plants, we are further streamlining and modernizing our operations. Additionally, our strategic partnerships with co-manufacturers are designed to enhance our capabilities and enable us to quickly bring new and exciting products to consumers, while further driving efficiency across our overall network. Finally, we anticipate reinvesting a portion of these savings back to support our brands across our portfolio, while making sure we continue to build long-term brand equity with our consumers. In summary, as we enter our next chapter, we expect the Meals & Beverages division to provide dependable and profitable growth. I want to acknowledge the team that has gotten us this far, and I'm excited to continue to build the future of Meals & Beverages together with them. We're on an incredibly important journey to transform our division. Our transformation story is far from complete, as we challenge ourselves to unlock the potential of our portfolio of iconic and distinctive brands. We will win through compelling consumer engagement and exciting flavor forward innovation. The addition of Rao's strengthens and solidifies our potential and elevates our overall portfolio. Finally, while we grow our business, we expect to deliver margin expansion through a combination of Sovos synergies and our network optimization plans. We are striving to set a standard for performance in the center store, and I have full confidence in our team to achieve that goal as they continue to bring out the best in each other. Thank you for your time. I'll turn it now back to Rebecca to talk a little bit about a couple of instructions. Thank you all.

All right. Thank you, Mick. We have covered a ton of ground already this morning, but we have so much more excitement coming in the afternoon session. So at this time, we're going to pause the webcast, and we're going to resume at 12:30 with Carrie Anderson's financial presentation. So remember, if you're listening online and have any questions, you may submit them on the webcast platform. We're going to be taking questions during the Q&A, both from folks in the room as well as those online. So make sure you get your questions into the queue. So with that, I think we're going to pause the webcast. [Break]

Good afternoon, everyone. I'm going to close things out. Throughout the day, you have seen the significant transformation of Campbell's over the last 5 years and understand our enthusiasm for this next chapter. So let me now bring together everything that you've heard so that you can fully appreciate why we believe setting the standard in the industry is appropriate and a realistic objective for us. We are in a much stronger organization position today to undertake this next step in the business. With our portfolio of leading brands and attractive focused categories, the acceleration in our innovation pipeline and a supply chain that is now a competitive advantage powered by our Campbell's Way of Working, we are confident in our ability to deliver on our long-term algorithm. This, combined with strong cash flow, a flexible balance sheet and disciplined capital priorities gives us a stronger foundation than ever to drive top-tier performance and set the standard in the industry. So let me begin with our long-term algorithm. So as Mark introduced at the start of the day, our long-term algorithm is expected to deliver organic net sales growth of 2% to 3%, adjusted EBIT growth of 4% to 6% and adjusted EPS of 7% to 9% through fiscal 2027. The fiscal '25 guidance we recently provided on our year-end earnings call on August 29, will be a transition into our algorithm. As the consumer environment normalizes this year, we expect the business to accelerate into fiscal '26 and beyond. Four key drivers would aid in this acceleration. First, we expect strengthening consumer demand and our commitment to marketing and innovation will benefit our portfolio of leadership brands. As you heard from Chris and Mick, our leadership brands are uniquely positioned in attractive center store and snacking categories for a variety of economic climates through our mix of premium and value offerings. Second, as we fully integrate the faster-growing Sovos business into our Meals & Beverages division, we will solidify our top line growth while significantly adding to our earnings and our cash flow. Third, we're increasing our range of opportunities to grow earnings and expand margins by leveraging our scale, driving efficiencies across the enterprise and optimizing our portfolio mix. I'll dive deeper into these strategies shortly. And lastly, by converting earnings growth into cash flow growth, we'll continue to strengthen our balance sheet and reduce leverage, leading to adjusted EPS growth outpacing adjusted EBIT growth. Now let me turn to the drivers of each of the components of our algorithm, beginning with the top line. To be clear, our plan is designed to drive organic top line growth reaching 3% on a long-term basis, though we are setting our algorithm at a more modest 2% to 3% range. This is up from our prior algorithm of approximately 2%. This change is driven by the addition of the faster-growing Sovos and Rao's portfolio of products. The expected growth of our legacy leadership brands and the active shaping of our portfolio to exit slower growth brands such as Emerald nuts and Pop Secret while also strategically reducing partner and contract brands in our snacks business. We've also enhanced our revenue management capabilities, utilizing price pack architecture and promotional efficiency tools to drive greater revenue realization. Collectively, these drivers and actions have the added benefit of creating more predictable performance going forward. And as you've heard from Mick and Chris, we expect Meals & Beverages to deliver top line growth of 1% to 2% and snacks to deliver 3% to 4%. And within this algorithm, our leadership brands across both divisions are expected to deliver approximately 3% with soup growth, as you've heard, flat. We believe we have the right set of leadership brands in advantaged categories supported by our continued commitment to marketing and innovation reflected in our $1 billion pipeline to grow our top line 2% to 3%. Next up is EBIT growth. We have implemented an effective strategy to achieve growth target at the upper end of our range, though we're providing guidance within a range of 4% to 6%, similar to the approach with our net sales algorithm. Underlying this growth are the following drivers: First, we expect favorable volume and mix will contribute to EBIT growth, driven by growth of our leadership brands. Second, we expect strong business fundamentals, primarily productivity initiatives tied to our foundational Campbell's Way of Working program to more than offset inflation and other supply chain costs. Third, we are expecting additional enterprise cost savings, building our extensive track record of identifying and delivering targeted savings across the entire business with the launch of a new program that will extend through fiscal '28. These drivers of earnings growth will more than offset the anticipated investments in the business, including marketing, innovation and capability efforts in our people, all aimed at sustaining top line growth. So let's go a bit deeper into each of these drivers. First, by focusing on enhancing our elevated leadership brands, we'll strategically -- while strategically deemphasizing and reducing our scale brands, we expect a favorable volume and mix earnings benefit. Specifically, we expect our leadership brands to grow from approximately 84% of our total net sales in fiscal '24 to approximately 87% by the end of fiscal '27. We expect to benefit from the roughly 45% variable contribution margin advantage that our leadership brands have over our scale brands, which will translate to about 40 basis points in margin improvement by fiscal '27 for the total company. Most of that improvement will come through our Snacks division as Chris walked you through earlier. Next, fundamentals. Over the last 2 years, we have consistently delivered productivity gains of about 3% of cost of products sold or roughly $200 million annually. Going forward, we expect to sustain this level of annual improvement through the broader application of Campbell's Ways of Working or CWOW, for short. And more than offset the low single-digit headwind from the combination of inflation and other supply chain costs. Let me expand on our CWOW productivity program. Our CWOW playbook provides a road map and an organization structure that drives ownership, team-based improvement and sharing of best practices to drive sustainable business results. The playbook helps create a common language, common KPIs and a balanced scorecard to ensure that we are winning the hour, winning the shift and winning the day, as you've heard. Over the past 24 months, we have deployed this playbook to all manufacturing sites, and we are now extending CWOW to our network of warehouses as well as our commercialization process. It is through CWOW that we have confidence in delivering this level of annual productivity that will flow savings to adjusted EBIT, with the savings expected to come from the balance of procurement, manufacturing and logistics and transportation network. Our third adjusted EBIT driver is enterprise cost savings. These are broad strategic organization-wide initiatives aimed at reducing costs across the entire company. We've had a great track record of delivering meaningful cost savings over the last several years with $60 million realized in fiscal '24 alone. And we've reached $950 million in cumulative savings towards our $1 billion cost savings goal since 2015. As we look forward to the next several years, we see even more opportunities as we integrate Sovos and drive network optimization and scale initiatives across the company. And as a result, we will be sunsetting the existing program early and adding the remaining $50 million of the old program, along with $200 million in newly identified opportunities to create a $250 million cost savings program that will run through fiscal '28. We will refer to this program as PEAK. PEAK has 4 key saving focus areas: network optimization, integration synergies, technology and org effectiveness, and indirect spend management. PEAK is expected to deliver approximately $70 million in fiscal '25 alone and approximately $180 million over the next 3 years thereafter, with most savings achieved by fiscal '27. The largest portion of expected savings, approximately $70 million will come from our Meals & Beverages network optimization efforts, which include the closure of our Tualatin, Oregon Pacific plant and the rightsizing of our Paris, Texas plant to focus exclusively on sauce and salsa. Also benefiting meals and beverages will be the Sovos integration savings of $50 million. This, combined with the $10 million in savings we've already achieved in fiscal '24 will bring total Sovos integration expected savings to $60 million, a step up from our original targets. For Snacks, we are expecting $50 million in network optimization, including the rightsizing of our Jeffersonville, Indiana plant and DSD initiatives. $50 million of savings is expected to come from technology and org effectiveness initiatives, including aligning resources and integrating and advancing tools, systems and processes to facilitate decision-making, enhance employee productivity. Rounding out the balance is $30 million in expected savings from indirect spend management at the enterprise level. We expect roughly half of this benefit to flow into our gross profit margin with the other half coming from marketing and SG&A expense areas. We see the level and timing of cash implementation costs to generate this level of savings to be manageable within the cash flow generation and capital allocation priorities, I'll discuss shortly. We expect these enterprise cost savings will help to fund critical investments to support our growth initiatives, including additional marketing and new product innovation. This will enable the company to be at our targeted range of 9% to 10% of net sales for marketing and selling expense. The final component of our long-term algorithm is our adjusted EPS growth target of 7% to 9%, which reflects our commitment to maximizing shareholder returns while maintaining strong financial foundation to meet our short- and long-term objectives. Our adjusted EPS growth through fiscal '27 will be driven by our adjusted EBIT growth contribution along with a reduction in interest expense as we delever following the Sovos acquisition. We plan to continue our plan of anti-dilutive share repurchases to neutralize any impact of the company's equity-based compensation programs to EPS, and our adjusted tax rate is assumed to be -- remain relatively constant pending any legislative changes. So now let's move to the second area of top-tier performance. Our plan to drive significant shareholder value creation through cash flow generation and a disciplined approach towards capital allocation. Our business has consistently demonstrated the ability to generate strong cash flow. Over the last 5 years, we've averaged approximately $1.2 billion of annual operating cash flow. We expect even healthier levels of operating cash flow going forward with growth to $1.5 billion in fiscal '27. This will be fueled by accelerating revenue, incremental EBITDA contribution from Sovos, margin improvement across both divisions, working capital discipline and a reduction in onetime cost outlays for the Sovos integration and broader network optimization efforts. The result will be approximately $4 billion in operating cash flow over the next 3 years, which will be used to strengthen our balance sheet, to support growth of our business and create shareholder value. This high level of cash generation from which we can make capital -- this level of cash generation provides a strong foundation from which we can make capital allocation decisions. Our long-term capital priorities remain unchanged and are focused on shareholder value creation. First, we are committed to investing in our business, support long-term growth and competitiveness targeting projects that deliver strong returns on invested capital of 10% or more. The next 2 are commitments to maintaining our competitive dividend and our strong investment-grade balance sheet with a target leverage ratio of approximately 3x. And as we create additional flexibility in our balance sheet, this will allow us to continue to pursue future tuck-in acquisitions that are strategically relevant for our portfolio and can be integrated successfully. Finally, we will continue to repurchase shares to offset dilution from employee incentive compensation programs while opportunistically looking at and pursuing strategic repurchases. So let me share a bit more with you on each of the first 4 pillars that will play the largest role in value creation over the next several years: First, capital investment. At our last Investor Day, we outlined plans to increase CapEx starting in fiscal '23 to a range of 4% to 5% of net sales to maintain our existing assets, support innovation, expand capacity and improve margins. Through fiscal '27, we expect to invest at the higher end of that range as we support further capacity expansion, network optimization initiatives, our Sovos brand integration and upgrades across manufacturing, automation and IT capabilities. As previously noted, we target a 10% return on invested capital in line with our historical return profile. Second, our competitive dividend. Over the last several years, we have completed 3 significant acquisitions and endured a global pandemic and other market challenges, we have maintained a consistent dividend payout ratio of approximately 50% and generally in line with the peer group. This underscores our dedication to consistently delivering returns to our shareholders. We remain committed to maintaining a competitive dividend with future payout growth supported by earnings growth. Next, the strength of our balance sheet. As previously noted, one of our top priorities is maintaining an investment-grade balance sheet, with a target leverage ratio of approximately 3x. Throughout our recent history, we have proven our ability to quickly return to this level following a major acquisition. As we did after acquiring Snyder's-Lance in fiscal '18, and then to maintain this target level as we did from fiscal '21 through fiscal '23. We plan to employ our proven approach to debt management to continue reducing our leverage following our Sovos Brands acquisition, returning to our target leverage ratio in fiscal '27. Leverage reduction will be driven by a balanced contribution from EBITDA growth and debt pay down. And we've already made progress on reducing our leverage ratio. Now it's 3.7x, down from a peak of 3.9x at the time of the acquisition close. After-tax proceeds from our recent sale of Pop Secret will also be used to reduce debt. Finally, as we strengthen our balance sheet, we will continue to explore further opportunities to create value through strategic acquisitions. Mark shared with you earlier our disciplined approach to identify and vet these opportunities. At the highest level, it is based on 4 criteria: In core or near in adjacent categories, where we have advantaged expertise and capabilities. Quickly accretive through an attractive financial profile and the development of detailed operating plans that support our growth ambitions on both top line and bottom line. Easily integrated to fully realize synergies and to maximize growth potential without distracting from our existing core businesses. And lastly, the flexibility to maintain our capital priorities. To ensure that the acquisition does not hinder our long-term balance sheet flexibility or put our capital priorities at risk. We've leveraged these criteria to support the successful acquisitions of Snyder's-Lance, Pacific and most recently, Sovos brands. And in the case of Snyder's-Lance and Pacific, we were able to drive high single-digit internal rates of return. While we are about 6 months into our integration of Sovos Brands, we could not be more pleased with the continued performance of the business and the early positive returns against those metrics. And we are confident in our ability to unlock further shareholder value through a fast and effective integration that captures meaningful synergies and drives continued business growth. If we go to the next page, you'll see that favorable performance to date. We are at or ahead of plan across all 5 of our metrics. We've exceeded expectations of revenue growth to date with approximately 19% pro forma fiscal '24 growth to $1.1 billion and see additional opportunities for further growth. We've already captured $10 million in savings in fiscal '24, and we're on track for $60 million by fiscal '27, $10 more than originally planned. We benefited from a very successful issuance of bonds in March at favorable interest rates relative to our transaction assumptions helping to drive a neutral impact to adjusted EPS in fiscal '24. We expect this acquisition to turn accretive by the second half of fiscal '25. And we've already touched on our leverage ratio where we remain on track to return to our target level in fiscal '27. As a reminder, fiscal '25 will be a transition year into our algorithm. We provided guidance for the year as part of our fourth quarter earnings call. We are expecting reported net sales growth of 9% to 11%, organic growth of 0% to 2%, adjusted EBIT growth of 9% to 11%, an adjusted EPS of 1% to 4%. As we move beyond fiscal '25, we're excited to deliver on the plans that we've just shared with you today, which will support our long-term algorithm with organic net sales growth of 2% to 3%, adjusted EBIT growth of 4% to 6% and adjusted EPS of 7% to 9%. And let's not forget operating cash flow of $4 billion over the next 3 years. As I wrap up, I just want to reiterate our conviction that now is the time to take the next step of our journey and set the standard for the food industry. Our business is in a much stronger position today than it was at our last Investor Day 3 years ago and from where the journey began 5 years ago. We have a focused, well-positioned portfolio with 16 leadership brands making up about 84% of our net sales and operating and growing fast advantaged categories. Our execution and capabilities have never been stronger, turning what was once an opportunity area into a true competitive advantage. And with our refreshed long-term algorithm, we have a clear roadmap for multiyear top and bottom line expansion. Our investor proposition is compelling. With strong and growing operating cash flow generation, providing multiple paths to create shareholder value and meet the expectations as we've outlined for you today. We hope you now have a better appreciation of our leading strategic positioning and share our enthusiasm and confidence for the future and the next growth chapter for Campbell's. So with that, I'll hand it back to Rebecca to begin Q&A. Thank you.

Okay. Thank you, Carrie. We are going to just set the stage for Q&A. [Operator Instructions]. So welcome back to the stage Mark Clouse, Chris Foley, Mick Beekhuizen, Carrie Anderson and Dan Poland. [Operator Instructions] Let's start in the audience. Alexia.

Alexia Howard from Bernstein. How have digital capabilities improved your approach to promotions, marketing and innovation. And by that, I mean, can you give us some examples of what you can do today couldn't do pre-COVID.

Great. So maybe what I'll do is I'll start with on innovation, let you guys talk a little bit about promotion and what you're doing with revenue management. So although I recognize that Campbell's may not be always seen at the tip of the spear for AI and other cutting-edge, I've always believed technology, quite frankly, our goal is to be a great applier of it. I don't know that I would expect to be developing it. But I will say that an area that we started very early, this was almost 6 years ago. We created an interface between our end market data, our panel data and the mining that we were doing on social media to come together in a consumer insight engine, and very critical for us as we advanced our innovation strategy was to be able to utilize this approach using AI to better and more quickly arrive at what the next trend was going to be relative to flavor and recipe, which, as you can imagine, quite important to us, both in the snacking business as well is in our meals and beverage business. And so now 5 years later, this has really become the go-to tool in the company for all aspects of marketing and innovation. And I think in many ways, we were an earlier adopter of the technology. And now we've refined it so that our broad organization is able to tap into it and use it in a very frequent manner. Like if you think about what we've been doing on soup flavors or line extensions on Kettle or even some of our influencer selection to figure out who's the best position to speak to the consumers we want to speak to. So I think that's a great example of what I describe as more practical or tangible translation of digitization or technology. But maybe you guys can talk a little bit more about how you're using it every day relative to promotions and revenue management.

Sure. A quick build, it would be a high percentage of our business much higher than in the past, starts on a screen in terms of the purchase. So you're close to 20% in terms of the amount of purchases that in some form start on the screen. And if you were to talk to our top customers, they want to see that go up significantly. So for us to be really good in that space is important. So whether that's specific programs around trial of new innovation or windows of time, whether it's back-to-school or the holidays. These are places that we need to be really good with our assortment of products, but also our messages that are tailored to that purchase, that starts on a screen. So I think that's a place that is still accelerating. We know that our retailers want to go there, but we've gotten very good at it.

And so I'll add like two kind of quick. One example is for instance to what you're describing, you heard me talk earlier about influencers, right? And that we often look at kind of what is happening in the broader marketplace and some of that happens organic as well, particularly with cooking. And I'll give you an example, for instance, with the chicken cobbler where one of the influencers developed their own recipe made actually the product with one of our condensed soups. And we saw it, we jumped on it, connected with the influencer, but also connected with the customer, and made sure that we have disproportionate displays in the store while we ran basically the influencer activation again together with them now in partnership. And as a result, you saw disproportionate lift. So that is kind of talking to the digital connection, if you want, with what's happening in the marketplace that is really important for us, and the team is continuously monitoring it. To Mark's earlier point around revenue management. Revenue management has obviously been absolutely critical to capability that we continue to be focused on in the organization. We need to make sure that we have competitive price points, but also that, we are promoting when it matters and that we also promote where it matters. And that comes back to, for instance, examples of when we are running campaigns what's our overall promotion strategy, but then not only look at it in the moment for the planning, but also retroactively make sure that we learn from that so we continuously improve. And we continue to make sure that where we allocate that promotional activity that we're actually going to get the best return on the investment.

[Operator Instructions] Doug, I think we have a question up here in the front.

It's Tom Palmer at Citi. I wanted to ask just on the DSD optimization side, it looks like it was embedded in some of the network optimization bucket in snacks, but something earlier this year, you talked about in a bit more detail. So maybe just an update on that and kind of how critical that is when we think about this margin and flex in snacks, not just through 2027, but kind of beyond?

Sure. Tom, I can take that one. So I think like I talked about, there's really 3 big pillars for our route-to-market and DSD work. The first one is where we're subscale, we're buying back Pepperidge Farm and Snyder's-Lance routes, combining them and reselling it. That is a plan that we're managing over the next 4 years and about 20% of our total routes. That is off to a great start and we like the metrics we're seeing, but we're also -- the way I would describe it is the demand for those combined routes is higher than we had anticipated, which is a good sign for us. It means that, that proposition is strong. It also is a good sign in terms of the way we model it around how long we're to sell those new routes. So that's one space. The other space is around just taking miles off the road. So we've got 32 hubs out there and 1,100 depots and we're trying to take more miles off the road by consolidating that and the team has done some tremendous work to continue to drive efficiency around bringing everything into the same hubs and jointly into some of the depots. And so that's an overall multiyear project, too, that we're hitting our numbers that's built into that basis points improvement that I talked about in the presentation. And then the third one, which is a little different, but it's also important, is also around technology and what we're doing to give in the markets the technology that's needed to be able to order for growth to think differently about how do we grow faster and have all the tools, a little bit less on margin, a little more on accelerating growth. So we don't have as many subscale regions where we need to do a different strategy. So the 3 really work together, and they're embedded in our route-to-market approach across everything in snacks.

I mean, we always said that the combination of the routes was not a dramatic margin contributor. It was almost more about the effectiveness of it, but you do see it built in to that network optimization. And I think one of the things we're happy to see is that as we're rolling it out, I think there are some, let's call it, unforeseen benefits that you're getting on the efficiency side as well. So probably more to come for that for the future. We've kept it pretty conservative, really looking forward to be more of an enabler of performance as much as it is margin. Whereas combination of the warehouses and depots, miles off the road, those become more significant contributors to the network optimization.

And I think over the years, we have -- there's been questions that have come around why don't we just bring everything together. It's really important to emphasize that there are regions where it does not make sense ever to do that because we have the full scale, where you'd want more trucks. We want to make sure that we continue...

Yes, you still have 2 trucks.

We're in one of them right now in New York City. I mean this is a place where the density of the products is there, so it makes sense for us to continue to have the multi trucks.

Great. We've got a couple of questions up here, Doug. You want to go to Ken Goldman.

Ken Goldman, JPMorgan. Just a quick point of clarification. Is it 9% to 10% sales and marketing as a percent of sales rather for both segments? Is that the goal? And then if that's the case, why is that? Wouldn't it naturally be -- or I would naturally assume it would be a little bit higher just for the faster growing segment as snacks. So I just wanted to get a little bit of color on that, if I could. .

Yes. So we are targeting it for both and part of the thinking is that is the snacking, I think, is a pretty understandable goal that benchmarks very well with kind of where snacking resides from a share of voice and kind of consistency of the flow of innovation. I think on meals and beverage, what we've come to appreciate, especially with the addition now of Rao's as part of the objective, our ability to drive awareness and innovation as a tool, we want to make sure that we support those adequately. I mean, I've said that we had talked a few folks about the from-to on our innovation capabilities at Campbell's. And I think one of the things we're a little bit guilty of is not always creating the same conviction of support behind the news that we're launching. And as we think about driving broader awareness on Rao's and driving growth there, I think, we've tried to create for ourselves room to be able to distort a little bit more investment. Now over the next decade, does that kind of normalize into a little bit different levels? Perhaps. But for right now, I think having that kind of firepower built in for both divisions is a good planning stance or good strategy. Mick, anything to add on it would be -- I mean it's a step up from where we've been, but not...

I agree, I think, it is important, and back to Mark a little bit to build on what you're saying is that we nourish the full portfolio, right? You heard me talk a little bit about V8 for instance. We need to make sure that we actually support that brand. And if we're going to do that, I believe that we're going to be able to add to that growth algorithm with brands like V8. And that's just an example within the broader portfolio. So hence, you get more to that 9% to 10%.

And one of the things that I spared you showing you the same chart that I've shown for the 6 years I've been here, but it is a fact that if you look at the last 20 years, when we support soup, the category does fine, right? Relatively flat to slightly positive. It is when we have backed off of support and commitment to the category that we've struggled and so we want to make sure that in a world of a bit more balanced portfolio that we also protect that as well.

Okay. Great. Rob?

Rob Moskow, TD Cowen. I think we're all kind of wondering what it's going to take to bridge from your current organic growth of 0% to 2% to get to the 2% to 3% kind of run rate. And I think just decompose, I think the 2% to 3% is kind of based on historical experience, which I guess makes sense. But a couple of things about history. Like we just went through an inflation super cycle and I think your biggest retailer and a lot of other constituents don't want more pricing from here, and it might take a while before you get to normal pricing. So was your 2% to 3% in history, didn't that include some pricing components. So what if there is no pricing, can you still get there? And then the second element is, you talked about still exiting some partner brands. Mathematically, I think it's about a 50 basis point per year headwind to the overall company. How do you offset that within your algo?

Yes. So I think -- it's a great question. The first thing I just would say is as you did see in our algorithm, we're not anticipating a tremendous amount of pricing, although I do expect some of the revenue management as we've kind of cycle through this period of inflation with some spend back and how do we optimize that trade and promotional investment, I think, small, but some contribution. I think from a snack standpoint, there's always been good volume-centric and volume-driven growth. I think on certain parts of the meals and beverage business you've experienced that as well, especially in the sauces world, both Rao's as well as our core business of Prego and Pace have always been able to contribute. I think soup historically has been a little bit more challenged on the volumetric fuel for growth, but that's also a bit of why in our algorithm, we've got it relatively flat. So I don't think there's anything that is a radical departure of history, but I agree with you, that's why this year, I think, is going to be so important to get the marketing and selling back in place to get the innovation funnel fully up and running, fine-tune a little bit as it relates to the promotional spending and then step into a '26, where I really expect there to be more of a normalized environment and the opportunity for us to drive those growth rates going forward. Now I think as always is the case, we're going to watch the inflation environment. We're going to watch the elements that are out there. And although I would agree with you, I don't think today, given the state of where consumers are, the pricing is a desirable outcome. I think affordability plays a big role. Good news is we don't see that on the horizon as necessary. But as we get out into the algorithm, I would certainly expect there to be a time where we begin to see that contribute a bit more. So think of it as a little bit more volumetrically probably in the early curve and then probably easing a little bit more back into normality on the back end. But I think that's why it's so important for us to have that innovation in that marketing and selling in place as well because I do think a lot of the winning and losing in the next couple of years is going to be determined by who wins in market. And being ready for that, I think, is going to be quite important. Well, let's talk about -- yes, you take the partner brand.

So the partner brands, we assume are going to continue to be dilutive, partner and contract together over the next 3 years, as you called out, but at much lower absolute rate. There is a place for these in our business that make strategic sense. There are places where it makes sense for us to have other brands on the truck, but it will be a much smaller absolute percentage by fiscal '27. So the 2 of them together in the range of about 4% of the business. So a little bit different numbers than what you had exactly called out in terms of that diluted amount year-on-year, but different from what we've seen in the previous periods in terms of how important it is to the absolute business. As I said earlier, 88% will be leadership brands by fiscal '27. That's where we see the importance of growth to balance out that less dilutive, but still dilutive piece that's in partner and contract.

So safe to say, maybe, Chris, sequentially getting less impactful as that [ base declines. ]

That's right.

Over here. Bryan.

Brian Spillane from Bank of America. I'm pinch hitting for Pete, who's on vacation in Spain. So I got a question on capital allocation, it's kind of multipart. So the first is free cash flow conversion. Do we expect it to stay at the same level it is now? Or kind of where do you see free cash flow conversion going forward first?

Okay. Let me take that. So historically, I would say, over the last 5 years, we've averaged about 95%. If you looked at fiscal '24, we're in the 70% range. and there's reasons for that as we think about the investments that we've made on the capital -- CapEx side of the business. We're doing some network optimization initiatives. We've invested in the consolidation of our headquarters, so good reasons as we think about those investments at the higher end of our CapEx target that have required us to reinvest, but should provide future margin expansion and future growth opportunities. As I think about fiscal '25, I would think sequential improvement from fiscal '24, but probably still less than 80%. And then as we move into '26 and '27, you'll start to move above 80%. But I think our CapEx over the next few years are going to be a little bit elevated there and our network optimization initiatives and our Sovos integration. We'll use some cash. But again, these are things that will drive further future top line growth and margin expansion. So good uses of cash.

Okay. And then the follow-up to that is in the presentation, investment was used a few times. There's P&L investment in both segments. We've talked about capital investment. Can you give us some perspective? Well, 2 questions. One is on the P&L investments in the segments, do you need that extra marketing spend to hit the targets? Or is that there in case there's -- it gives you flexibility to do something else. So just trying to -- it goes back to Ken Goldman's question, right? Is 9% to 10% the right number, should it be more? So how important is that savings? And then I got a second -- follow-up to that.

Yes. So I would say that always is the case, and I think this past year was actually a little bit of an experience where we -- let's call it adjusted the knobs to equalize a little bit for where I might need that investment relative to promotion and/or marketing and selling. I think the 9% to 10% gives us the most flexibility in an anticipated world where you're still seeing a strong competitive pressure, a little bit to Rob's question as well, where you need, I would say, a bit more fuel to drive the volumetric side of it. And so I think it's important to have it. Now I also would say that it would put us at the high end of where we've ever been and that inherently, I think, does give us a little bit of flexibility. As we said when we started the day, the goal in mind was try to create an algorithm where you've got a couple pockets of places where you're kind of prepared for the unforeseen. But I feel like the more of that we're investing behind the brands, it's probably indicating that we're driving growth and hopefully beating growth. So I would say we anticipate using it, but we also anticipate having a lot of reasons to believe that we could drive growth even faster. So that kind of helps, but good to start with it in the...

Last one, I promise. Carrie, just same question on CapEx. It's going to be elevated in the next couple of years. The things you're investing in are -- there's a lot of technology and things that are -- the world has changed, right? So there's a need to upgrade, I guess, or update. So just what's the maintenance CapEx going forward? And should we be thinking about maybe the replacement cycle on some of the capital items being faster because technology gets outdated too quickly?

Well, certainly within our 4% to 5%, if we have the maintenance CapEx in there, so it's been -- it's probably been in that 50% range of that CapEx. It's been in that neighborhood of CapEx. But I think it's -- capacity investments, I think, have been the driver of why we're at the top end of our range. And historically, we've been more of the 3% to 4%. This year, we got up to 5%. In fiscal '25, we're expecting 5%. And I think the investments that are getting there are not the maintenance pieces, but a lot of what's getting us to that higher end is the stuff around CapEx investment towards growth, some of the headquarter consolidation initiatives our network optimization initiatives as we consolidate our network and consolidate our plans.

Dan, maybe talk a little bit about the, let's call it, the state of affairs of age of assets, how we're feeling about our network and through the lens of having put in quite a bit of new equipment along the way. But obviously, part of that question is, Hey, and you hear this a lot in, I mean, from prior lives, sometimes the good news, bad news is these ovens last 50 years. But if you got a bunch of 50-year-old ovens that are all coming due at the same time, that could be a challenge. I think we're in a pretty good position. But Dan, maybe just talk a little bit about...

I'll expand on that a little bit. I think it's a good question and related to how we're looking at the physical infrastructures that we have, but we tie that into our network strategy. And the work that Mick mentioned in our Paris location, for instance, and making that just a sauce center of excellence. Those are very strategically minded investments we're making so that we can take capital and put it against growth and not necessarily maintaining facilities. At the same time, Campbell's Way of Working is creating capacity in our network and that's allowing us to do those kind of things, so it's a combination of things that are allowing us to do that.

I don't think there's any big bubble there, right? And I think as is the case for most of our variables and the algorithm, we've just tried to make sure we've got room to accommodate what the elements are that we need to drive. And so I think appropriate is the way I would describe the balance between the growth and the productivity as well as the maintenance and infrastructure.

Great. Doug, can you get Andrew Lazar, please?

Andrew Lazar at Barclays. Dan, a question for you on supply chain. I think there was some maybe hope that with the industry having lived through all the supply chain disruptions over the last couple of years that coming out of it, retailers would be more apt to favor those suppliers that actually have invested in supply chain can prove they've got supply chain resiliency, maybe because they don't want to go through what they did in terms of out of stocks and everything else. Is that just me sort of being high in the sky, do retailers actually -- now that we're sort of in a more stable environment, do they actually care more about those that have invested in supply chain and are more resilient? Or am I making more of it than it is? And if they do, do you feel like Campbell is now in a place where you can offer that or maybe you didn't before?

That's a great question, Andrew and I'm sure both Chris, Mick and Mark can relate to this as well. But I would say coming out of COVID, all of the supply chains learned a tremendous amount about agility and what we need to do during the COVID years, right? And the retailers themselves also learn from that in many respects as far as inventory levels, service levels, those types of things. And we find ourselves in a great position, Andrew, from a supply chain to be a competitive advantage for both divisions going forward. And we have great relationships with all of the retailers in the United States and having a good positive approach to everything that we're doing from a metric perspective. So I would -- they're also expecting us to be even better than we were before COVID. And those are the things that we're working with them very closely as their inventory levels where they need to have to service their consumers at their store levels. Those are the things that we're working on all the time in the supply chain.

Yes. I think, one of the things that served us well during COVID was -- and we were pretty, I think, open and transparent about this, a function to some degree of the integration and the combination of different supply chains coming together. We were -- it was a bit of a weaker area for us and the need to transform really couldn't afford to wait until post COVID. So as much as it would have been nice not to have to try to kind of change the tires a bit while the car was moving. I think it's ended up serving us well because we did have to do it. And so as we came out of that COVID period, I do think we were able to jump forward. And in many ways, that advantage is very well recognized by customers. And even in the world we're in now, we know we have a broth supplier that has been out of the market for a while. Five years ago, we would never have been able to step into that moment and really take full opportunity to help with that supply. Now we're going to give some of that back here in the back half. But still, I'd much rather have had that many more incremental homes with Swanson broth in it than in the past where our supply chain just couldn't react to that. And that the customers remember and appreciates when it comes time to decide who do we depend on for the holiday ad or whatever the case may be, I think you're right. I think it matters a lot. And again, I think we're coming into a window where executional capability is going to begin to differentiate food companies more than the last several years, where we were all kind of a little bit being moved by macro dynamics. It's going to be more about who's in the best position to win the day. And that I think is something that we're quite mindful of.

David Palmer?

Dave Palmer, Evercore ISI. Just a question about how you're thinking about -- and Mark, can you talk a little bit about this off-line, just how you're thinking about snacking in America, how the growth rate for your portfolio, the category will go? Coming out of COVID, obviously, we're in a funk, lapping some of these monster numbers. During that era, there was consumer behavior reasons for those big growth rates, pricing reasons. Now we're seeing, obviously, some players getting back on shelf, the pricing is under pressure a little bit more and the consumer is under pressure, too. So I'm wondering how you're looking at the consumer and the environment and thinking about how we will normalize here? Like how you think about the pace of normalization and what you're going to be looking at as milestones during this fiscal year on your path to that normalized rate?

Chris, why don't you start with [indiscernible] I'll give you my point of view, too. But why don't you start with what you're seeing in the consumer landscape.

Yes, I think similar to what I shared earlier, it's kind of there's the short term and the long term and the short term right now is so tied, too. These are discretionary categories. You're seeing some value decision-making, bifurcation of consumer groups and very different across different categories. I do think it's important sometimes we paint a broad brush of snacks. We're in many different categories across cookies, crackers, pretzels, organic tortilla chips. These have different growth rates also tied to them. Some are already bouncing back pretty significantly. If you look at total Kettle chips as an example, others are in slower growth. So I think there is a short-term piece to this, but where our confidence is, is in the fundamental trends that are tied to snacking. If people are changing the way that they were eating, if you were seeing age cohort shifting in a way that started to put real pressure on the way in which people are snacking, you don't see that. You see quite the opposite. You see a really positive young generational approach to snacking as well as just the trends in the way people eat. I think it's a period of adjustment, the when is a little harder, I think, to pinpoint. We'd love to be able to say, here's what it is and how we're going to build our plans against that and our production and everything else. But our confidence in what's happening in snacking and our ability to win with our products, as I talked about, is pretty sky high. It's just around how do we time that recovery knowing what we're seeing in market around some of the discretionary choices being made.

Yes. Look, I think the other thing I just would say is, when you look at where the strain is in snacking, it's a tougher day to be in the mainstream segment, right, because that's where you're feeling more of that trade down pressure to private label. I mean I thought perhaps for me, one of the most important pages in Chris' presentation today was the chart that projected where the growth and where the size of the price tiers are within snacking. And so one of the things that I think is giving us confidence to return to historical levels is really the fact that we're playing in categories that I think are better suited for consumers that aren't experiencing as much of the walk back. I mentioned on the earnings call, yes, Kettle potato chips last quarter was up 7%. It doesn't feel like a collapse of the behavior, even pretzels and tortilla chips, especially in our added value segments were mid-single-digit growth rates and total snacking was up 1%. So not 3, and I get that, but in the world of are there a relatively balanced set of variables that are indicating a return. I also think, remember, in our third quarter of this year, you will begin the cycle where the step down in stacking occurred. So your comps are going to get naturally a little bit more stable. I'm not seeing any structural momentum of departure from snacking. I'm actually seeing some modest normalizing already, which would, to me, indicate that as we go into the back half of our year, we should see a better trajectory and tailwind. Now appropriately, I think for '25, we've been fairly conservative. I think we'll all feel a little better when we see those numbers. But I certainly am not seeing a lot on the structural side, would make me concerned. But I also would say I'm not seeing something that tells me it will be October 1. So I think planning it in a bit more pragmatic way for '25, I think, is the right stance.

Lots of questions. So Doug, do you want to take Max upfront, please?

Let's make sure we get a couple of online people too, Rebecca.

Max Gumport with BNP Paribas. A question on the meals and beverage margin target. So I think at the FY '22 Investor Day, you had a 21% target for FY '25. Currently, we're more in the 17%, 18% range and I realize there were unforeseen events that have occurred since then. But what I'm curious about is, one, what structurally changed to lower this target from 21% to 19%. And then two, what's giving you the confidence to guide to this expansion in light of the challenges you have had over the last couple of years?

Yes, great questions. So let me start off with the first one first. So I obviously wasn't in this job at that point in time, but I recall the moment that we put it out there and if I compare to kind of what happened between then and now, one piece of it is the overall portfolio composition, right? The portfolio composition changed a bit. And if anything, I actually feel with the way that we've evolved the portfolio, although the margin might be a little bit lower, we actually have more fuel for growth. So I feel actually very good about that kind of portfolio journey that we've been on. And you see that also with a little bit of margin pressure with, for instance, adding Sovos to our portfolio has added some of the margin dilution, right? Now we have synergies, which we're working through in order to obviously make sure that we help offset that margin dilution. But I'd say portfolio composition is one component of it. And the other piece of it is, over the past couple of years, we've been very diligent in and around pricing across our portfolio. And particularly when you look at, sure, all went through a very inflationary time period and that we have selectively taken pricing actions in areas where we felt comfortable to make sure that we could help offset some of those inflation pressures. However, we always needed to make sure that we stay competitive in the marketplace. And as a result, I'd probably say sometimes inflation went a little bit ahead of overall pricing.

It's a really important point because it was one of the categories really the -- I guess there were a couple of places, but certainly, the most significant where we decided consciously that the value proposition, we know that there are some hard and fast barriers that if you are to cross them as it relates to broth or condensed soup that you're going to have a real headwind for consumers on value. And so I think what you see happening in the months ahead, and Mick can cover this in a little more detail. But you see us now taking a step back, seeing that landscape and then organizing ourselves to look for the opportunities to address some of that structural inflation to try to get some of it back overtime, a little bit elevated productivity, some of the network work, all are tools that will allow us to get back, albeit not to the '21, but still meaningful recovery from what we've experienced the last couple of years. And I guess the good news is, in a world where a lot of people are questioning, well, is every price action that's been taken sustainable, I think the thoughtfulness that have gone into the soup decisions, I would say, we're as strong on that one as any because we really did make that more of an exception where we took it.

And then to the second part of your question and maybe to build a little bit on what Mark is saying around confidence in the margin journey going forward. Listen, I think there are a couple of components in there, and I talked about it, obviously, earlier, but the Sovos synergies is one. Carrie mentioned it as well, it's off to a great start. Again, focus on synergies, but maintaining the growth, the brand is absolutely critical, so let there be no mistake, right? That being said, I feel confident around that synergy target that we have and that we're going to deliver on that. And then the other piece is you heard me talk about the network optimization. You heard Dan allude to it earlier as well. These are actions that we've taken. We have very specific plans. We talked about Tualatin. We talked about Paris. We talked about the investments in Maxton and Napoleon. So we have a very clear plan in place that we're executing on and, as a result, I feel very confident about -- on our overall margin journey going forward.

Mark, it's a question coming from Michael Arnold. Are there any plans to buy other brands or companies?

So as I said earlier today, I would start that answer by saying we feel great about the portfolio that we've assembled. In fact, we've gone to great lengths to shape it into what we have today. And we don't need anything else from an acquisition standpoint to deliver the algorithm we have. Having said that though, I did point out a couple areas where tuck-in acquisitions could make sense. To me, anywhere where we have a gap, especially in the premium end of the categories we're in, is very attractive. I would like to see maybe a little bit more clear, better-for-you brand within our snacking portfolio. I think there's a couple adjacent segments that could be helpful for us within snacking to have that. And then I'm very conscious of the ongoing kind of demographic shifts that are going on in the United States, a desire to get to a little bit more authentic, especially Hispanic brand. I'm not speaking to kind of less of kind of the traditional, but more of imagining kind of Mexican American or a little bit more elevated or more premium space, which could be interesting, I'd say, to some degree, within the Asian community as well as a good opportunity. So those are the areas we're looking at. But again, no sense of need to go out and do that. If it presents itself, we'll take a look at it. Again, good to have the power of the cash flow generation. But remember, those capital priorities are pretty hard and fast for us.

Yes. [ Casey. ]

I had a 2-part question on Rao's. The first one was just with Goldfish, you mentioned trailing and sort of aspirational number. But with Rao, you only did trailing. I'm just curious if that was an oversight or maybe the range of outcomes are too great. Just maybe just you could comment on that.

Yes. It's not an oversight. It is -- listen, I mean, you -- first of all, a lot of confidence around Rao's and the continued growth. You heard me talk a lot about it. That mid- to high single-digit growth target is what we're building towards to get above $1 billion. We didn't set like a specific, if you want, dollar target that we declared. Very focused on first reaching the $1 billion, but I feel very confident about that growth rate going forward. And also, when you look back and you heard me talk about it, it is on the one hand within our sauce portfolio. We have a lot of opportunity within sauces, but we also have all these adjacent categories. And how far can we reach the overall Rao's brand? I think there's a lot of areas to play, so as a result, I feel very confident about the plan that we've laid out today.

And remember, at high single digit, right, as the upper end of that range off of a base that's as large as Rao's is today, I mean, that's a significant contribution of growth. And so I think that's a little bit of the dynamic. As much as I'd like to be seeing 25% growth rates in the perpetuity, we get -- we catch up a little bit with the reality of a $1 billion business. But nonetheless, I think it's a good number.

And just a follow-up. I mean, you touched on it. But on a trailing basis, I'm curious of the $900 million, I mean, how much is sauce versus non-sauce? And then going forward, I'm really curious about what your expectations are on the different growth rates and the interaction between sort of sauce and non-sauce?

Yes, exactly. Okay. So a good question. If you think about the vast majority of the business is still sauce, right? So as I mentioned, sauce is boss, right? And yes, we did that for a reason because it's also something that we talk about internally a lot because we want to make sure that we don't get away from the core. And the core sauce business is absolutely critical for the brand. I'd say that is as a result. And you heard me talk a little bit about this cases, if you look at the growth going forward, 75% of it we expect to come from core sauce business. And then 25% are these adjacent categories. And yes, as a result, coming back to what I said earlier, I think, we have a lot of areas to play with, but sauce is absolutely critical.

Yes. And I do think we -- the team has done an amazing job on remaining disciplined on where to expand. And I think, if anything, that continues to be refined, right? Our guardrails for Rao's are going to be very protective. I think the magic of that brand is that when you buy it, you have a certain expectation like it's going to be made with that sauce that you love, whatever the category may be. And so we will be relentless in protecting that quality component of this brand because I'd much rather have that in the long term than compromising to get to a couple of extra million of revenue that is going to undermine the brand longer term.

[Operator Instructions]

Steve Powers from Deutsche Bank. A question on the objectives to elevate innovation as a driver of sales. First part of that is just is it more innovation? Or is the goal bigger, more efficacious innovation, number one? And then secondly, you've got innovation that's very intentionally kind of fast-in, fast-out seasonal limited time offer and then you've got innovation that's intentionally more sticky. Some sense of the size of those 2 buckets, if I could. And then how you grade yourself on the stickiness part and any objectives you have to improve stickiness and how you measure that?

Yes. So maybe I'll start and then let you guys weigh in on the 2 divisions. Yes, is my answer to the question. It's a little bit of both, right? So we are loving the fact that, for example, on snacks, we've driven 2 big platforms in Goldfish Crisps and air fried on Kettle that are really textbook and spicy on our chunky line. Those are really textbook examples of what best-in-class looks like, right? You're building a really innovative, disruptive capability or experience that you then can broaden across a variety of different flavors, pack sizes and so forth, and team has done a great job on that. So yes, I would like to see more of that because I think they tend to be more sustainable, more efficient to support, but I would also say that as we get better executionally flavor rotation and some of the limited time offer strategies are incredibly effective. I was describing way back when I was at Mondelez, this is one of the things that we started on Oreo back in those days. And one of the things that we really learned is kind of leave them wanting for a little bit more. So being disciplined, not making it too big of a percentage of your total innovation, but yet utilizing it to drive excitement because it's so often incremental to the base purchases in the category. And so utilizing what we're doing on Goldfish on other brands within the portfolio, to me, is a great playbook that can travel. You just can't get -- you can take it too far, and that's what we want to make sure we're guarded and whoever the partners are, they need to be elevating the brand, not borrowing too much from the brand. And so I think you'll hopefully see the majority of that innovation still coming through in platforms, but with a healthy contribution. And as you think about how we climb the ladder from 3 to 4, I think, you're going to get more, if you will, in both areas. So maybe a little bit on meals and beverage and snacks on how you guys are feeling about.

I mean I love the question about innovation. I appreciate the question, Steve. So I think I talked with some of you about it also during the break. Overall, innovation is absolutely critical for our overall portfolio. On the one hand, of course, on a brand like Sovos or Rao's, we talked a little bit about it around like the expansion of the overall portfolio is critical, and there's a long way to go. But even if you look at our super and broth portfolio, and you look at our traditional portfolio, making sure that we continue to innovate that we keep that portfolio of products fresh and also appeal to younger consumers, right? For instance, with the flavor innovation and some of what Mark also alluded to with, for instance, spicy and chunky that has brought a lot of younger households into our overall super and broth portfolio. So making sure that we continue to bring the consumer along and bring consumers into the category or into our brands is absolutely critical. And then also with innovation, making sure that what I refer to as activation and make sure that we have exciting recipes so that people use our products. That's another piece of, I'll call it, innovation that might not -- you might not immediately think about, but it's very important not just to put a product out there, but also, Hey, here are different ways that you can actually use the product, some of which you actually saw today during the innovation showcase, which then might also create new occasions because now somebody is taking a kind of condensed soup and it's actually making some tortillas dish with it and they're using it as a dipping sauce. And now you suddenly have a whole new occasion, and we are entering into a snacking occasion where we previously weren't playing. So those are kind of different ways that we're thinking about it. I love the focus on innovation, and I love the focus on innovation across our portfolio, which I believe it plays different roles, but it's absolutely important for meals and beverages.

Yes. On snacking, as I talked about, our brands are all about elevated, differentiated. You have to win an innovation and so it can always be bigger. We're going to keep pushing to make these platforms even bigger and in more channels and full distribution every place we can get it. I see our innovation team in the back of this room. We've got excellent talent in this space, too, that are always looking for where are those new ideas, where are those new unmet needs, where are those consumer occasions that snacking can play differently. What I love about where we are at Campbell Snacks is we're in all these different segments. And if you look at some of the things that Mark just mentioned, like Goldfish Crisps or pop'ems that we've talked about, it takes advantage of the assets that we know pretzels and we know chips and we know crackers, and we know cookies. And that's what's happening. We're not forcing it from the inside. We're listening to consumers who are telling us the textures, the flavors. These are smashing together in different ways in snacking, and we're really well positioned to win against them. Our challenge then is, okay, make it efficiently, make it big, build it into a platform. We've got 2 that have been huge successes. We want more, and we're going to continue to drive those. And then the limited time offering. Another thing I would point out is so important if you're going to win the holidays, if you're going to win back to school, if you're going to win these moments that you need to win with our brands, you have to bring something unique like Holiday Nog to Chessman or whatever else that is that the retailer says, I'll take that, and I'll give you a display of your entire assortment, too. Executionally, that's a huge important thing for us.

[Operator Instructions]

Brian Callen at Bank of America. Mark, let me flip the online question around, what about divestitures? Can you just update us on the Noosa process, if there's anything there. And then Carrie, how are you thinking about that piece of if there's divestitures, are you baking that into your interest expense assumptions or just more broadly, how you're thinking about sort of the debt maturity refinancing needs over the next year plus.

Yes. Great. So I continue to be clear on 2 things. One, I like the Noosa business a lot. It is a unique brand and very well positioned and actually performing fairly well. And so I'm not prepared to part with this unless it's a reasonable and fair value. On the other hand, I remain committed to the fact that I don't think yogurt necessarily is a category longer term that matches our core. It's not an area of focus. So I remain confident in both our opportunity to make a good strategic decision on that, but also not in any mad rush to do that. It's a different -- to me, a very different business and one that I think warrants a good fair value. But nonetheless, I think there will be a moment where that is an opportunity for us on the divestiture side. I think short of that one, especially following the Pop Secret sale, we're feeling great about the portfolio. I mean we've gone to great effort to -- I hope that one of your big takeaways from today is really that reshaping and refining of the portfolio and what it looks like today versus what it looked like 5 years ago. So I'm feeling really good about what we've got now in that business. But maybe talk a little bit about proceeds of Noosa.

Yes, so first Noosa is in our numbers. So as we think about the algorithm we gave you, we didn't assume that Noosa was out. Obviously, Pop Secret, we did guide what the number was, excluding Pop Secret. But we talked about the Pop Secret, the proceeds are being used for pay down of debt. So if we had an opportunity with Noosa, we would look at considerably the same thing in terms of assessing kind of where we are. Our priority is obviously to get our balance sheet, to have that flexibility restored as quickly as possible. So we'd continue to look in those areas there.

Okay. Great. Did you have a question, Ann, earlier? We're good. Okay. Okay. I saw your hand up a little while.

Priya Ohri-Gupta at Barclays. Mark, we talked a lot about innovation. But on the last conference call, and we've been hearing this a little bit more consistently from other manufacturers as well. We're starting to see a lot of competitive entrants, and SKU proliferation in the market. So how do you keep the consumer focused on the innovation and really sort of the value-add that you guys are trying to offer, what sort of messaging does that entail? And then a follow-up for Carrie, just in terms of thinking through sort of optimizing that balance sheet flexibility, where would you ideally like to see your credit rating land sort of as we get closer to fiscal '26, '27.

Yes. Great. Well, I think the key on the innovation side is you got to bring something new and different. I think consumers are, as you would expect, quite savvy and especially in an environment like we're in today, where their decision, especially in the snacking world to make choices that are really differentiated and that are exciting. And so it's not a day for lazy innovation. You've got to really look for ways in which you're bringing something new to the world. Now that can still be a flavor, but you're going to want to make it more interesting, more intriguing first to market with it. I do think what you're seeing right now is a greater proliferation of what I would describe as more me-too products. And although that does create some pressure in the shorter term, harder when they start to cycle that, unless there's something that's really new and different. I do think there's -- we're -- as we did with crisp, then we did with air-fry, those were highly incremental to the categories they were in, which is a very important measuring stick. I think our customers are actually a little more savvy too. And really, let's call it, holding accountable companies for bringing true news versus just another version of something. So it's raised the bar. And this is why all the things we've done to improve the consumer-centric nature of how we're building our pipelines have become so important. And having that in place is giving us a lot more conviction and confidence that the innovation that we're going to launch is truly new and new to the world and that that's where the bar is. And so I think we're well positioned for that, but it's -- we can't take our eye off it. Now always is the case, not everything is going to be a home run, and it's why it's nice to have a little bit deeper pipeline, too, right? Having that kind of $1 billion identified gives you the opportunity for -- we'll try to minimize it, but a miss or 2 and then having opportunities to backfill that is, I think, very important.

Mark, can I just build something to...

Sure, yes.

I think also in a world where the prices are higher overall, the worth that a consumer is doing when they evaluate a new item is a higher level of scrutiny. So for us, we've not launched things where the food didn't meet up to the par. I mean, we're a food company. We have to make the food that's much better than competition. Still the most important metric for innovation is repeat rate. You can get anybody to buy something once, it's whether or not the food is different and that much better. And so that's, I think, a bar that's raised for everybody, and the retailers expect that as well.

And you asked a question about investment grade and our commitment. I mean I want to reiterate that our commitment to investment grade. And I think it gives us the flexibility that we want to manage our capital priorities. I mentioned that our capital priorities have not changed and even as we're going through the Sovos acquisition, I think, it was an acquisition that was a good size that allowed us to still maintain our capital priorities. We talked about in our algorithm, we're not assuming strategic repurchases. So we're obviously making the right priorities there in terms of getting a plan to get back to 3 times. But the investment grade, I think rating gives us good flexibility to maintain our capital priorities through achievement of our long-term algorithm.

Yes. I mean it's really important, I think, as much as anything in the message today and a lot to be excited about in the potential for growth for the future. But the task that's really most critical to us is really to be dependable and reliable. Like at the end of the day, I think, our most compelling aspect of our story should be the fact that we are reliable and dependable to deliver results in a consistent way. And although that's not necessarily a direct correlation to investment grade to me, it all fits together in building that trust and dependability that I think is really at the end of the day, what underpins our thesis. A little more growth is great. But at the end of the day, dependability and reliability is quite important.

And that consistency of cash flow has been there year in and year out. And the opportunity now with Sovos is to actually see that cash flow even higher, which again, I get excited about because that gives us even more opportunities to create shareholder value over time.

I mean the speed to accretion on the Sovos acquisition, I mean, that is really best-in-class. I've done a lot of these over the years and to see that kind of translation that quickly is pretty powerful stuff.

Okay. Do we have any more questions? Did you want one more question? .

Ann Gurkin with Davenport. Thank you for the time today and explaining how you have reshaped and redefined your portfolio. It just begs the question for me. You've set up now 2 very strong platforms, Snacking and Meals & Beverages with products at different price points and different areas of the marketplace. And I think there are very 2 strong platforms going forward. And as you look to unlock value, it begs the question, would you consider ever separating into 2 platforms? Or are they at the point where you would even consider that conversation or that opportunity?

Sure. We have 24 seconds left. No, no. Look, I fully recognize that there may have been some things happening in our industry that would beg that question. Look, I hope that you feel like after going through today, that the uniqueness of this portfolio in both its focus, but also its breadth, right? I mean there could not be a better day to be in meals and beverages in the center store grocery than right now. And I like that. I like that in the sense of really now having an opportunity and a runway to see what this portfolio can deliver. So it's certainly our intent to play that strategy as you saw today forward. Now having said that, always, I've been very consistent in suggesting that we will always look at where the value creation opportunity is for shareholders. And if there's a point in time, we feel that there is an opportunity or it merits the discussion, we're certainly going to take a look at it. I'd like to believe that there are many things today we talked about that maybe 5 years ago, you would have been surprised that we collectively, as a company, are prepared to do the things that we're doing to really drive an advantage position. Our Board is constantly challenging myself and the team to make sure that we're focused on creating value. So I guess in the world of possibility certainly out there, it's a possibility, but not today. Today, I'm excited about the portfolio we've got and what we're going to do with it today.

Yes, you will be our last question. .

If it's a followup to that one Bryan, I am not inviting you back.

Pete made me ask. So similar to Ann's question, just thinking about it from cash flow, right? So you've got the meals business -- meals and sauces are huge cash generator, snacks less so. So if we -- if people were fantasizing about a snacks business that's independent, how would you view that without the cash flow of the rest of Campbell. So how important is cash flow you're sitting on to kind of...

I mean, I've always said this even from when I first started, the nature -- having lived through this with the journey on Kraft and Mondelez, the critical aspect that in any conversation about this that you would want is you want 2 businesses on its front foot, right? You want businesses that are playing offense and are incredibly compelling. Look, I think we're doing a lot of things to deliver upon that. But I would just say today, it's more in service of the total proposition of Campbell's. But nonetheless, that's important. And so when I think about looking at both sides of the business, they both have tremendous means in which to create value. And so although you are correct, as we continue to travel that journey on margin, they get stronger and stronger and that, I think, is important. And I've always said that, that best-in-class snacks businesses are ones that are able to be clear about the priority being growth, but a strong enough margin that you can fuel the flywheel. And that's what we're moving toward. And I think that's a great answer. And look, on Meals & Beverages, I think, the addition of Sovos is important because it solidifies conviction and confidence in the contribution of that business. Always with a strong margin, but even on that business, self-help that we think we can drive going forward. The fact we've got 2 great halves doesn't mean in anything other than those 2 halves together, I think, are pretty powerful. But both businesses, I think, are making a lot of progress. Rebecca, that's the end of Q&A.

I was just going to say, I think that's a wrap. I hope you all enjoyed today's experience. Thank you so much for coming and joining us, and sharing this day with us.