The J. M. Smucker Company (SJM) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for being here. On behalf of BofA Global Research, I'd like to welcome you all to this year's Consumer and Retail Conference here in Sunny Miami. I've been told to remind everybody that at 5:00 p.m., and I'm looking at Mike, 5:00 p.m. there is a cocktail reception on the ocean terrace, did I have that correct? My name is Peter Galbo. I'm from the food and beverage team at BofA. And this morning, we're delighted to be kicking off the conference with the J. M. Smucker Company, $8.5 billion in revenue and a market leader in retail coffee, jellies, peanut butter, pet snacks and cat food. Smucker's recently reported its fiscal third quarter and also recently announced the pending sale of its dog food business for $1.2 billion, which is expected to close in this fiscal fourth quarter. Please join me in welcoming to the stage Mark Smucker, Chairman, President and CEO; as well as Tucker Marshall, Executive Vice President and CFO. Guys, thank you for being here, and welcome.

Thanks for having us.

Thank you, Peter.

Nice [ intimate ] group.

That's great. So Tucker, first one to you, just to kick it off. Coming out of reporting a couple of weeks ago, I think there were some questions around how you'd be deploying cash proceeds from dog food divestiture. You also filed an 8-K earlier this month around share repurchases. I just want to give you an opportunity to address that kind of off the bat.

Yes, absolutely. Good morning, Peter, and good morning, everyone. So as you know, we have an anticipation of $1.2 billion on the pending closure of our dog food portfolio, and we intend to use approximately $700 million of the $1.2 billion proceeds to repurchase our shares. And in addition, using the balance to primarily strengthen our balance sheet through debt pay down. On Thursday, the 2nd of March, we did issue an 8-K. That 8-K acknowledged that we would repurchase 4.7 million shares, which essentially replaces the $0.45 dilution. We'll do that in 2 steps. One is through the open window in this month of March, approximately half of the 4.7 million shares. And then on trigger of the transaction closing, we will repurchase the balance of those shares in the month of May.

Great. And then, Mark, also in the past couple of weeks, you made a number of leadership changes, including Tucker taking on some additional responsibilities. You've had some departures since the December Investor Day. So can you just give us some brief update on some of the moves and kind of what you've done.

Sure. Maybe also since you mentioned Tucker, I'll start with Tucker. As a result of -- we have a very clear strategy right now, right? And what you all are seeing is us executing against that strategy and being super focused. So the divestiture is the perfect manifestation of the strategy, particularly in pet where we're really focused on, obviously, pet snacks, dog snacks, specifically, and then Meow Mix is obviously a leading cat food brand. So we have a very clear strategy. We have been reshaping our portfolio and reshaping our portfolio includes M&A. So as we think about how we grow going forward, it is both organic and inorganic. And the organic stuff we've talked a lot about doubling down on Uncrustables, obviously, expanding our coffee portfolio and continuing that as well as the stuff I just mentioned in Pet. But as we think about future M&A, Tucker and I are really going to lead the strategic execution as we consider new opportunities that may be inorganic. And so Tucker, who does have a background in M&A pre Smucker will take on a corporate development function. We will be adding a resource or 2 to his team to support that. And then -- so just from a strategic standpoint, we feel that, that is -- that Tucker and I are going to have to play a very significant role in that -- in those efforts. And so we'll be working together on that as well. As it relates to Jeff's departure, obviously, very happy for Jeff. He's going to obviously start his new role in April. So very happy for him. And what we've essentially done is we are bringing in as a Chief Marketing Officer, Gail Hollander, who is our key point of contact and senior most contact at Publicis. And she has been a great partner for us for about 5 years now. And so bringing her into the company because she knows the model. We've -- as you all know, we worked very hard to really up our game in both marketing and sales. And because she was an integral part of the model on both the Smucker and the Publicis side, she is uniquely qualified to continue to run the play. And then on the sales side, we promoted a very senior individual, Robert Crane. He will be the Senior Vice President and Head of Sales as well as Sales Commercialization. And he will be reporting to John Brase, who is our COO. John actually has a tremendous amount of sales experience and so felt that they both have -- they can both learn from each other and John will be a tremendous support for Robert going forward as well.

Great. And you mentioned Uncrustables, I just want to make a plug there are Uncrustables in the back of the room. So if you didn't get one on the way in, please have 1 or 6 on the way out. But Mark, thank you for that. And then maybe we can just talk a little bit about Investor Day and CAGNY, you guys spoke about your transformation office, kind of a new venture for you that's going to focus on cost productivity. Just you've given a little bit of details, but just remind us kind of what you said and what you're thinking about, I guess, as we get into fiscal '24.

Yes, I'll start, and I think Tucker may have a couple of comments here. Our transformation office, we set up several months ago with Amy Held, leading it. Amy had been our Chief Strategy Officer. And it's a big job, right? And so wanting her to focus 100% on transformation. The way that I have described that office is culturally, we've always had a continuous improvement mindset. This is taking it to the next level. It's institutionalizing that mindset and that involves how we think about continuous improvement, how we ingrain certain processes in the company that allow our broadly -- more broadly our teams to think about how do we always continue to get better. And so there will be cost reduction. It is going to support profit improvement as well as reinvesting in the business. And although we have not been transparent yet about specific targets, and we are -- as Tucker will remind us all, we're in the planning process for next year right now. We will, over time, be a bit more transparent about what that means, but we feel very confident in our ability to deliver both cost savings and business reinvestment.

Some of the other benefits that come from the transformation office is they're supporting the transition services agreement and addressing stranded overhead costs associated with the anticipated pet divestiture. And they will also, at the right time, support integration and synergy realization for an acquisition opportunity. So those are a couple of other activities within the transformation office. Over the last couple of weeks, we've gotten the question around what is the financial benefit to the transformation office in any given fiscal year. And the way that I would just frame that in for you today is our long-term growth algorithm is low single-digit top line growth. And then our operating income or midline algorithm is mid-single-digit growth. And in order to get to that mid-single-digit growth, you need the benefits from your transformation office. And so as you can see, kind of going from low single digit to mid-single digit, part of that benefit will be continuous improvement, which is the balance of both returning or profit growth from transformation, but also the reinvestment opportunity from the transformation efforts.

And is there anything we should think about even early stages percentage of COGS? I mean, I think you've given some guideposts but anything more there just on kind of what we could see.

Peter, I think over time, we'll be able to sort of break down, what the benefit is by each line item. But I think right now, we're focused on the full bucket of initiatives over the multiyear period and then what the near-term benefit can be to FY '24 to support next fiscal year.

Great. And then Tucker, maybe you've given some preliminary thoughts on fiscal '24 at CAGNY. I know there's kind of been some qualitative headwinds and tailwinds you've talked about, but maybe you can just remind us of that, anything you've kind of also noticed maybe as you're getting through the planning process.

Yes. So we are very much beginning and kicking off the planning process, and so we'll be able to provide full color on our fourth quarter earnings call, which is in early June. But as we did share at CAGNY, some of the tailwinds that we're seeing for next fiscal year is: one, lapping the Jif peanut butter product recall at the top line. That was about a 2-point impact to this fiscal year. We're also seeing the benefit of increased capacity associated with our Uncrustables portfolio as we get the full capacity opportunity out of our Longmont, Colorado facility. And then we're also seeing continued base business momentum across our coffee and pet portfolio. And then I would just acknowledge that the headwinds for next fiscal year will be lapping the impact of the divestiture and then continuing to assess and monitor the overall inflationary environment inclusive of kind of consumer behavior and category shifts potentially. And then as you think about the bottom line, really, the year-over-year EPS opportunity really starts with the $0.80 impact of the Jif peanut butter product recall. So we would anticipate that being an add back to where we finished this fiscal year. And then we would then consider what the aspects of both base business growth would be. We will have reinvestment next year and continued support of the portfolio. A good example of that is the Uncrustables expansion. And then we'll also continue to assess just the overall supply chain, manufacturing and cost environment to understand its year-over-year impact. And then we will see benefits from the transformation office, and then we should see some benefits sort of below operating income on the interest side as well. But then before you factor in all of those just around the core business, you will then have to isolate what the impact is for the divestiture year-over-year. First is the timing of replacing of the divested earnings of $0.45. I spoke to that earlier that we're actively working against that through share repurchases. We will want to understand sort of what the impact is or the benefits around TSA income, network services fees and otherwise to support stranded overhead. And then lastly, is there any additional benefits from transformation to kind of support the net impact of stranded overhead year-over-year. So those are sort of the puts and calls that we're considering in the planning process for next year. But the good thing is, is that the base momentum of the business, both the top line and bottom line appears to be good.

Awesome. Thanks for that. So Mark, maybe we can just move back kind of higher level on the consumer. Just what you're seeing across your business from a consumer behavior standpoint, how your elasticities have evolved just even since the beginning of the year versus last year? And maybe any major differences across Pet, Coffee and Consumer Foods?

Sure, Pete. Generally, I think in the macro sense, the consumer continues to be very robust. And we're not economists, but you -- just studying the economy, the consumer behavior, you're seeing consumers continuing to spend. And really, the economy continues to be -- to appear pretty healthy given the consumer spending. And so consumers -- our elasticities generally as well have been a bit more moderated than we would have expected. That's true across our portfolio where we might be seeing a bit more elasticities is in premium coffee and K-Cups. That is not unusual given the circumstances and the pricing in the marketplace. From a coffee perspective, our strategy has always been to play in all the segments. And so offering products and brands across the value spectrum really works well for us because when you do have some shifts in the marketplace, that does benefit us. So Folgers obviously, is a more mainstream coffee, has continued to see nice top line. And then some of the elasticities that I mentioned in the more premium segments have been kind of as expected. But in the last few months, we feel that the pricing gaps have been corrected. And so we would anticipate over time that would continue to support the business. In Pet, particularly as it relates to dog snacks and cat food, we have seen continued momentum. Milk-Bone has performed very well across multiple segments, not only the core biscuits, but as well as like the soft and Chewy, which would be our Pup-Peroni brand. And then Uncrustables shows no sign of slowing down, as we know and we have really benefited from not only strong consumer demand, strong household penetration, but continued both top and bottom line improvement in Uncrustables, and we would expect that to continue as long as we continue to add capacity.

Great. And maybe just to start with coffee as we get a little bit deeper into the segments. Just can you talk about the pricing environment? So what you're seeing, not only on shelf, but for green coffee cost, I know have moved a tremendous amount. We're still waiting kind of for an update on the South American crop, but just kind of what you're seeing.

Yes, the coffee has been volatile. Typically, what's not unusual is this volatility preharvest, right, pre crop. So seeing some of the speculative ups and downs that we've seen is not at all unusual. We hedge our coffee. We don't necessarily buy coffee on a daily basis, but we do hedge and take positions in coffee to support the delivery of our financial plan. At the end of the day, we're -- we set our targets, we set our budget, our plan and we hedge in order to achieve those financial metrics. So we don't speculate. And given the fact that there has been a little bit of speculation, there's been -- there was momentarily some downward pressure. We have seen coffee cost come back to sort of a place where they've been -- have improved and will improve through the fourth quarter. But it still remains to be seen what's going to happen with coffee costs in the futures market. We have not seen a significant moderation of coffee costs at this time, but we will continue to watch. And there are some early reads on the crop that the crop may not be as big as was originally expected, but it's still early, and we'll be watching that very closely over the next month or so.

And so that was going to be my next question. Just can you remind us like what's the time line? When will we actually know...

So we're just getting some early reads right now. It usually starts with Brazil, right, because that's clearly the biggest market. It's the only market where they actually do a mechanical harvesting, everywhere else it's hand -- harvested by hand. And so Brazil, generally, we get some early reads. There's been some intel that the flowering, the trees flower, then they produce the cherry and then, of course, inside the cherry is the seed, which is the bean. There's been some early reads that the flowering maybe hasn't been as robust as originally expected. But again, it's a bit early to know for sure. So we'll just watch closely.

Great. And then maybe, Tucker and Mark touched on this, just margins in coffee. That's a lot of your implied fourth quarter margin improvement. So maybe you can just kind of dissect that for us.

So as we constructed our financial plan for this fiscal year, fiscal '23, we knew that coffee margins would improve throughout the fiscal year. And so sequentially, they have improved. And we are anticipating the fourth quarter to be the best of the 4, largely due to the balance between the price/cost relationship in that quarter. And so that's where we're seeing the benefit.

Great. And then, Mark, just on the M&A topic, I feel like one of the areas you focused in on at CAGNY was really tuck-in or bolt-on capabilities in coffee, particularly around cold. We all kind of tried the Dunkin' Cold product at CAGNY, I think was a big hit. But maybe you can just talk to us about what you've done out there organically, what you see out there from an inorganic perspective?

Yes. So the -- as again -- and we talked about this a little bit at dinner last night, Pete, the -- where we've been successful in coffee is shifting our portfolio where the consumer is going. So that would mean premium, we -- 10 years ago, when we acquired the Coffee business, Dunkin' was expected to only be like a $50 million to $100 million business. We think it's going to get to $1 billion. We're already at $800 million plus on Dunkin'. So we have -- still have great hopes for Dunkin' and then shifting our portfolio to single-serve, which was obviously, we were the first national player to partner with Keurig and so continuing to ride that wave has been beneficial. Now as you're seeing the third wave of coffee was craft coffee, craft brewing method to pour over all of that. Now we're seeing the fourth wave of coffee, which is consumption of coffee in -- at home in a variety of ways. So think of younger consumers making coffee cocktails in the morning, if you will, with multiple ingredients. It could be a coffee concentrate, some form of creamer dairy or non-dairy, sweetener and so flavor and so forth. So that is becoming more common. We do see that the consumer is going in multiple directions, but we have started to address some of those trends with your comment about Dunkin' Cold and we will continue to push out on liquid forms of coffee in whichever way we can, both Dunkin' and Bustelo. And then to the extent that there are attractive acquisitions that we can tuck in, we would continue to be interested in those. But again, you can never control the timing of those. And so we'll just continue to look for those and think very prudently about how we go forward.

Great. Yes, we had some fun with those instagram videos of the coffee cocktail, -- yes. Maybe I'll just take a quick pause in the room, see if anybody had any questions. I think we have a mic going around. So Mark, let's switch over to Consumer Foods. There's been a lot of activity here over the past year, past years, a lot of transformation. We talked a little bit about the Jif peanut butter recall already. Maybe just want to give you a chance to talk about the jellies and jams business. You've had quite a bit of transformation there, but just some people in the audience might not be familiar with some of the undertakings.

It's our namesake brand, right? We did consolidate recently closed our small manufacturing facility in Ripon, Wisconsin. And so all of the production of jams and jellies now resides in our flagship plant, which is on the same campus as our headquarters in Northeast Ohio. And where we've had a lot of success is rationalizing the long tail of flavors that we had, the unique fruits and so forth that were much smaller volumes for us and getting very disciplined about eliminating that long tail. And what we've seen is we eliminated about 30% of our SKUs and have actually grown our top line as consumers have concentrated back into more of the core flavors. Now at our annual meeting every year, we always get a couple of consumers asking why do we eliminate Black raspberry, it's not the same as BlackBerry, it's different. But we eliminated that flavor probably 7 or 8 years ago because the price of Black Raspberries went to like $10 a pound. So it's kind of a no-brainer on that one. But we've done that more -- in a more disciplined way in the last year with a lot of our SKUs and just getting the portfolio more concentrated and efficient.

Great. All right. time for everyone's favorite topic, Uncrustables. Just you've seen explosive growth, obviously, in the brand. You have a lot of initiatives underway there, both from a product standpoint, a production standpoint. Maybe you can just give us an update on kind of where things are today.

So the most recent great news is that the Longmont, Colorado, just north of Denver, that expansion is complete, and that has provided us with a bit of additional capacity to meet demand. Again, part of our dinner conversation yesterday was our focus on grape and strawberry right now because we still have a lot of the other SKUs like honey, peanut butter honey, peanut butter only, the hazelnut, chocolate hazelnut items, but those are -- we're really focusing on grape and strawberry to meet demand. Longmont provides a bit more capacity. I'm very pleased that the third facility in -- outside of Birmingham, Alabama is well under construction and on track to open in '25, fiscal '25 and I'll be there on Monday. So looking forward to actually seeing the progress that we've made in the McCalla plant in Alabama. So really, the momentum continues. We really believe that household penetration continues to be relatively low and probably be able to double that over time. So it's a rocket ship and continuing to drive growth there is going to be our #1 organic priority.

And as I was reminded last night, it's hazelnut. We don't call it by the other name, but they're hazelnut...

Chocolate hazelnut. We don't name them, right.

Exactly. And maybe just another on Uncrustables. You have the capacity expansion. You've looked into, I think, some meats and cheeses, Taco bites, those sorts of trial products. But just maybe you can give us a little bit of sense like how automated is the process, how much technology is really in these plants. It's a pretty unique product.

It is -- we talk about the runway that we have and the first mover advantage is significant because it is not easy to mass-produce these sandwiches. We sort of joke -- I mean it's not really that funny actually, that it took us about a decade to figure out how to mass produce them. It's really around the bread. It's around the technology to bake the bread in such a way that doesn't create air pockets, right? And so you don't have leaky sandwiches. So you have -- we have very consistent bread, the loads are actually round. I don't think they really talk about that, but -- and it's how you handle the bread. So we've developed a lot of proprietary equipment and bread baking knowledge over the years that has allowed us to really be able to consistently produce a lot of sandwiches at once. And I think we're -- I venture a guess, we're roughly producing about 4.5 million sandwiches a day in that ballpark.

And maybe we can talk a little bit about channel diversity. I mean it seems like there's still a pretty big -- capped white space across...

Yes. In order to support our -- the retail markets, the -- our mainstream, our grocery channels, we did pull back a little bit from some of the away-from-home, the foodservice channels like schools. They still are in schools, but there is definitely more opportunity in the away-from-home space. And that is not only schools and universities, but if you think about athletic facilities and places like that, a lot of golf courses are serving Uncrustables these days. And then Canada. We are -- the Canadians have been asking us to launch in Canada for about 15 years, and we're finally at a position where we think we have the capacity to support the Canadian market. So there's definitely opportunity.

And I know we have some of our Canadian friends in the room. I see a couple of friendly faces. So I'm sure they're excited about that.

Our team is really excited about it.

And then maybe just the last one on Consumer Foods. So we're thinking about lapping the Jif recall in the next year. I think Tucker, you've talked a little bit about just volume contributions or expected maybe volume contributions next year. Should we see it from a segment perspective, is Consumer Foods really going to be the strongest potential volume driver into fiscal '24?

When you consider the portfolio, yes, when you think about the consumer business because of the impact of the Jif peanut butter product recall, which primarily came through the first quarter although did have a full year effect. And then also, when you think about the continued momentum of the Uncrustables brand as it brought on new capacity through the Longmont, Colorado facility. So absolutely, from a top line perspective.

Great. Okay. Finally, just on the pet food. I know we've got about 10 minutes left, so I'll leave a little bit of time for Q&A. But we talked about the divestiture. There's a $700 million of cash that you'll get. There's also about 5 million shares, post shares that are coming with the deal. Just any restrictions around time line or how you can handle those shares just as they come in. I think that's a question we've been fielding quite a bit.

Yes. So of the $1.2 billion purchase price, $500 million of that came to us in the form of post shares to fixed number of shares, just over 5.3 million shares. Our intention is, over time, to orderly exit the ownership of our position in post holdings. I tend to do that in an orderly basis that not only supports our recapture of those $500 million of shares but also to support the post organization as well.

And just on the dilution, the $0.45, again, before buyback, your favorite term, stranded costs. I know it's still kind of qualitative at this point, but what you can give us in terms of you shipped out some plants. I think there are some people that are going with it, but how should we kind of frame it from a qualitative perspective?

Yes. So the divestiture was approximately $1.5 billion of top line sales, which was almost 20% of our total company sales. The good thing is, it was mid-single-digit profit impact from a total company standpoint. But when you divest 20% of your top line, you will have stranded overhead costs. And the areas that, that comes in are in the form of both headcount and nonheadcount aspects and the majority of it really is on the nonheadcount side. You think of sort of this notion of your distribution and network, your infrastructure side, also the way that you leverage certain things in the SG&A environment. And so what we will do is we will take a period of a couple of years to address stranded overhead particularly as we work through supporting a transition services agreement and also supporting co-manufacturing agreements as well. And furthermore, when you think about the net impact of stranded overhead, really what we're assessing is, one, is the total dollar amount or impact of stranded overhead. But two, what are the near-term benefits or offsets associated with transition services income, also how we're thinking about services that we're providing and being reimbursed for primarily through the network and distribution environment. And then also, what are the near-term benefits of the transformation office that will also help cover stranded overhead costs until we're able to take those out over time. We'll be able to provide better color on what that net impact is on our fourth quarter earnings call, but that's kind of how we're thinking through the impact of stranded overhead and addressing it over time.

And then Mark, just [indiscernible] Pet Food portfolio, just give us a sense of kind of what's the mix between snacks and cat food. And maybe we can even just start on Snacks, some of your initiatives at Milk-Bone creative out in the market?

Yes. The creative is working really well. The Bachelor at creative is working really well on Milk-Bone. We're working on some new creative on Pup-Peroni. But it's about 60-40, right, the [ remain co ]. So 60% snacks, pet dog snacks and then about 40% Meow Mix. We've been -- had some nice success on some of the premiumization in Milk-Bone, things like taking the biscuits and dipping them and stacking them. There's actually basically what looks like an Oreo for dogs. So there's been a number of different executions that -- and what's important about dog snacks is new news is very helpful. The base biscuits are incredibly strong and continue to grow. But having around the periphery, a lot of unique innovation really seems to drive the brand. Obviously, the soft and chewy we're a leader with Pup. And as we think about continuing to push out on other need states like long-lasting chews in order to occupy your dog dental space, we continue to push our innovation in those areas as well.

And what do you kind of say to folks who say, okay, you're not going to be in dog food anymore. It's just going to be snacks and cat, how do you compete effectively? What have you just learned?

Yes. Thanks for that question. We -- what we have learned over the years that we've been in the pet business is that snacks, cat and dog food behave very much like independent categories. And when we initially got into the category, we've sort of felt that there were 3 segments of 1 category. They behave as different categories. And so we don't need to be in dog food or have scale in dog food to be able to win in pet snacks. And if you rewind all the way back to the Big Heart acquisition, we -- when we acquired Big Heart, the crown jewel was the snacks business. And through over the years, we sort of felt like, well, we're going to have to be a bigger player in dog food. And what we learned is we don't need to be. And so let's focus our resources where we know we can win, and that's exactly what we're doing.

And then maybe just to wrap up on pet on Meow Mix. You called out some capacity constraints in dry dog -- or sorry, in dry cat in the last quarter, just kind of where you stand on that today. And then maybe just some opportunities on the wet cat side. I know it's kind of a growth area for you, but where we are.

Yes. On dry cat, we have been experiencing some supply chain disruption. We're working through that. As we've talked through the pandemic, we have experienced some supply chain disruption in various parts of our business. This is no different. We are working through that, and we continue to see that Meow Mix will have great year-over-year growth. And that going into the next fiscal, we will work through those supply chain issues and be back on track. And then wet cat is an opportunity. And we are in launch phase for some items there, and we'll have more to report in the coming quarters.

Great. And then Tucker, maybe just to wrap up and then we'll go back to Q&A in the room. Just free cash flow guidance for the year, anything to know in terms of your cash generation, maybe anything early on next year and then anything around capital allocation?

So our free cash flow guidance for this fiscal year is $550 million, but that's after accounting for $550 million worth of capital expenditures. That capital expenditures is elevated largely due to the Uncrustables growth expansion and will continue to be elevated over the next couple of fiscal years as we complete the McCalla Alabama facility. But there were a couple of items that were affecting free cash flow this year. One is the Jif peanut butter product recall. I think it was approximately $100 million impact. We also did make $70 million worth of pension contributions this year. And then we did have some additional cash taxes associated with not only the recall, but some other restructuring decisions that we made within sort of legal entities and otherwise.

Great. I think we'll go to Q&A in the room if there's any questions. Upfront here. Yes, there's one.

Perfect. Mark, can we come back to the inorganic growth conversation? And I guess I'm going to pair 2 things together here in the sense of what did you learn when you entered pet and how does that shape your focus going forward on inorganic opportunities in the sense that would you look at another big category? What did you learn from entering pet as you look at new categories? Or is it all bolt-on and capabilities? [indiscernible]

Sure. There -- our priority is -- our first priority will be in our existing categories focused on dog snacks and coffee. And we've been using this term no brew coffee, liquid coffee, Think about it as pre-brewed, right? It's already been brewed. So as we can round out coffee and pet snacks, that would be our first choice. Other food opportunities, whether it be frozen or snacking are also important to us. So there may be opportunities there. But our first choice, again, would be no brew coffee and pet snacks. New categories, where we've been pretty consistent in saying we are interested in new categories if they're growing categories and we're able to acquire a meaningful position, a leadership position or at least a meaningful share position in those categories, we would be interested in doing so, but we want to be prudent and obviously get those assets at the right value.

That's helpful. And then just maybe an extension there on temperature state. So Uncrustables has obviously done very well in the frozen space. Is there any capacity constraints in frozen or by retailers adding frozen and thinking of the dollar stores, for example, that continue to add freezers? Is there runway within the freezer or could you even expand your freezer shelf?

We believe there is opportunity to expand our position in the freezer. First and foremost, with Uncrustables, there's tons of room for Uncrustables growth. The frozen section continues to be a growth area for retailers, and that's across the entire set. Generally, I think what we would see is not adding more freezer space, but reconfiguring the -- what's in the freezers, I think, is what we would expect to see.

Probably have time for one more.

So you talked a lot about the opportunity in Uncrustables. Can you just talk a little bit more about your progress on the [ $1 billion pathway ]? And maybe quantify what that means for top line, maybe what some of your short-term priorities are versus longer-term priorities there?

So we have an ambition to be a $1 billion brand associated with Uncrustables primarily in the peanut butter jelly format. And we, a year ago, talked about being at over a 5-year time frame, but we're about a year ahead of that, so we're moving a little bit faster, which is great news. And as we think about what the contribution is, we think it's almost 1 point of contribution to our long-term growth algorithm over the next 5 years. And then we do see continued runway that $1 billion aspiration over the next 4 to 5 years.

Terrific. Well, I think we're right of time. Guys, thank you for kicking off the conference. Really appreciate it.

Thanks, man.

And we'll see you in the breakout.

Appreciate it.

Thanks, everyone.

Thank you.