WK Kellogg Co (KLG) Earnings Call Transcript & Summary

Welcome back everybody to our fireside chat with WK Kellogg Company. With me today are CEO, Gary Pilnick; and CFO, Dave McKinstray. Great to be with you both. Thanks for being here.

Maybe we'll kick it off -- Gary, it's been several quarters now since you were spun off from the Kellanova company, to become a standalone company and maybe a good place to start, especially for those that maybe haven't followed the story as closely, [indiscernible] to discuss what some of the key differences have been since the cereal business has been run as a separate company? And why you think a split away from Kellogg has been and will continue to be a positive for WK Kellogg?

Thanks, Andrew. Let me start with -- we were here last year with you, and you were kind enough to ask us to join -- it was pre-spin. This is the first time we're here as a publicly traded WK Kellogg, and we appreciate that. And last year, we talked about a lot of the promises we want to make, and we made commitments even before we were spun, about what we would deliver. And we're really pleased about where we are right now because we're delivering on those commitments, promises made, promises kept. And both Dave and I want to talk about just the volume of work that's going on at WK Kellogg, where as we execute on the spin and unplug from Kellanova, and we're just appreciative of everything the team is doing. Now with that said, let's talk about the spin logic for a second. When we were first designing the spin as it -- in terms of WK Kellogg Co, the view was we would be a stronger company as an independent organization. Now it's a little counterintuitive when you're part of a $15 billion global company like Kellogg Company was, but the view was we'd be able to prioritize and everything we would do is in service of cereal. We recognize that the strategy for WK Kellogg Co, the North American cereal business, would be distinctly different from that of the balance of Kellogg Company or Kellanova. So we can create our own strategy, we can then get the balance sheet we need to invest in that strategy and then create the organization to execute it. By doing that, we were able to then announce our algorithm of, hey, if we create a stable top-line and deliver that, we can then drive outsized margin expansion over the next 3 years. Now it's over the next 2 years, Andrew, because it's [Technical Difficulty] and the outsized margin expansion was 500 basis points of margin. We sit here today even more confident about our ability to do both of those things. So what's been different? I'll talk about the what and the how and what we talked about last year. We talked about an independent direct sales force. Unique for a company of our size, the Kellogg Company was known for its sales force, but it's part of a $10 billion North American business, which we were a part. It's an integrated business. It was the right way to run the business. We wanted to invest in our sales force and have a direct sales force with the same coverage that Kellogg Company had but focused only on cereal. And we think this is a capability that is something that's scalable and will drive real value going into the future. The other thing we talked about was the investment, our ability to announce investing $450 million to $500 million in our supply chain; it was maintained but not modernized, and we just reiterated that during our Q2 call. It's the same level of investment, $450 million to $500 million, the same margin expansion up to 500 basis points and the same timing as well, as we exit 2026. The things that we may have learned over the last year, because those are the what's that we talked about last year, I think we learned a couple of things about our business. 1, and this is a little bit surprising to us, our depth of understanding. The Kellogg Company has been at cereal for 118 years, literally, yet our understanding and grasp of this business is so much greater now than it was before. During the spin, Dave and team created P&Ls for each of our brands, each of our customers. So the insights in the business now that it's standalone, very different than when it was integrated. So we can make much more real-time decisions as we're running the business. The second thing would be speed. As part of an integrated company, of an integrated sales force, integrated supply chain, now all we do is cereal. The speed to go from idea to shelf to pantry is frictionless. We're moving incredibly fast. We had a couple of examples of that, but it's actually faster than we thought it would be. And maybe the last part that we believe is a tailwind for the business going forward is how much more personal we can make the business. Now you know the expression that strategy eats culture for breakfast. Now we're in that daypart. So I think we have standing to talk about this. But before it was 38,000 people, now it's 3,000. We visited all of our plants on multiple occasions, easier to get your arms around the team to drive engagement, drive inspiration and drive contribution. So that's something that we've learned over the last year. So the spin logic, we believe works. We're even more confident today that it was the right decision, and we're looking forward to the future.

Great. Thank you. As you mentioned, you're now a company singularly focused on the ready-to-eat cereal category. How are you thinking about the long-term outlook for the category? And are there any subsegments that you think are better positioned for growth that WK Kellogg is looking to take advantage of?

We love this category. My team, everybody is here today, we chose to be here. In fact, Kellogg invented this category. And this is a category we know that we can win in, and that's the reason we chose to be on this journey. It's big and durable. This is a category -- I'm not sure anybody remembers this category without having dozens of feet of space in every grocery store. It's important to retailers. It's the 5th largest category out of all their categories, it's the #1 warehouse category for them. So that's important to them. Plus it drives traffic, it gets great lift. So there's something very special that's important to retailers, and it's branded. That's what we love to do. And a branded category, you can -- when it's invested in properly and you drive innovation and merchandising and ideas, you could do something special. And we're also very proud of our food. We drive value, we drive nutrition, and when you think about all those things and there's a near-end growth opportunities and actually longer-term growth opportunities. Right now, granola, that's growing double digits. Sadly, we're not participating in that. We had the #1 granola brand not too long ago in Bear Naked, we had supply issues. But now as an independent company, we could focus on solving that. And if you start looking at the public data, I think you're going to see a change in that trajectory because we have largely solved it, but look, time will tell. Another one would be premium. In this day and age, when we know there's pressure on consumers, premium in our category is also growing, which gives you a sense of the overall affordability of our space. But don't sleep on our core brands. Because if you take a look at what's happening right now, the fastest-growing brand is Frosted Flakes. It's been around for 70 years. That's what happens when you get the flywheel spinning with merchandising and innovation and ideas. The part that I think, again, surprised us was when we're working through the strategy going forward, as we're taking a look at what we announced last year, and how do we make it even bigger and better, we are finding incremental ideas, growth initiatives within cereal. It's surprising because we didn't see them before. And we've been doing this for a while, as I said. But if you think about channels and platforms, we're underrepresented in e-commerce. We can do something different. We need to go focus on that and in formats. There's things that we could do in formats that we just haven't leveraged before, and that's what we want to go take. So we think there's a variety of different places that we can grow this business.

Great. Thank you. Your medium-term growth algorithm calls for a flat top-line. That's in the context of a category that's expected to be, call it, flat to down low-single digit over time. So it implies WK Kellogg will need to gain some share in the category to achieve that top-line target. And what gives you confidence that you'll be able to gain this share and what's continued to be always a relatively competitive category, rational but competitive? And has the market share performance so far been in line with what you'd initially anticipated?

It's the right question. We like the competition. We do think when our big branded players compete, that helps the entire category. So we're all winners when we do that. So that's why we're excited that we will only focus on cereal, and we wonder if that will have an impact on the other players as well. We certainly hope so. And when we think about this -- the way we're performing, we're performing largely as we expected, Andrew. We're 8 months through our first year, our first full year as a publicly traded company. We just reaffirmed our guidance. And what gives us confidence, as you take a look at our base business, 9 of our 11 biggest brands are all growing at or faster than their category. And actually, a 10th, as I just described before, might be making the turn. The second thing for us is look at Canada. Canada has actually reached a 40 share over certain time periods. The sales force is delivering beautifully for us. But the thing that we think about going into the future is we are transforming all of our demand-creating infrastructure. So while we're standing up a brand-new company, we're also transforming capital to transforming our marketing, our sales and our supply chain. And we think with those investments and as we execute, that will be a tailwind for our business going forward that will help us continue to drive at a stable top-line so that additional profit margin can rattle through the P&L.

Got it. The 500 basis points EBITDA margin opportunity that you've laid out is set to be preceded by, as you mentioned, $450 million to $500 million of incremental investment to modernize the supply chain. Can you remind everyone what the cadence of that spend will look like now that we have a bit more clarity on the pace of investment?

Yes. So we talked about this on the Q2 call, Andrew, but I think given the complexity of it, good to reiterate, so I appreciate the question. So what we said was the CapEx, and it's 2 pieces. So the capital side of things is up to $390 million. We've said for 2024, it's about $40 million, okay? So then the other side of it, the balance of it, that will come in '25 and '26, okay? The other side of it would be one-time costs. These are things like starting up new lines, severance, dismantling plants and closing things down. Things like that would be in this bucket, and that's $5 million in 2024 with then the rest coming in '25, '26 and maybe a small residual in '27. When you package it all together, up to $500 million with, call it, $45 million in 2024, $200 million in 2025 and then the bulk of the balance in '26 with potentially a small residual into 2027.

The company reaffirmed its outlook for expanding EBITDA margin from around 9% last year to 14% exiting '26. On the second quarter call, you also hinted that '25 EBITDA growth may approximate '24 EBITDA growth, for which current guidance is in the range of, call it, 3% to 5% or so. This would imply a pretty large acceleration in order to exit ‘26 at that 14% level. I guess what's the visibility to that level of acceleration?

Yes. I think a couple of things. We're very proud to come out and reaffirm guidance. If you look back to this time last year, what we've continued to do over the last year is sequentially improve our margin performance. When we spoke in August at our Investor day, we were talking about 9% for 2023. We were able to finish out 2023 a little bit stronger than that. And remember, we gave an initial guidance for 2024 at the time as well and when we came out with our official guidance on our Q4 call, we were able to increase that. Pleased that we've been able to reaffirm and if you look at our track record over the last year, we've been able to do what we've said. As we think about it going forward, what you can expect for us, Andrew, is sequential margin improvement as we go forward, through the end of 2026. We'll give more detailed guidance in the Q4 call for 2025 but then your visibility question, on 2026, we do expect a step up. As we talked about, if you think about our margin initiative, the centerpiece of it is our supply chain modernization. We have 6 plants today. We are closing 1 of our plants, and we're taking 1 down in size. What that looks like is, call it, 4-and-a-half plants versus the 6 we have today and so with that, all the costs associated with those plants come out of the P&L. Along with that, we're optimizing our manufacturing network. We talked about the cost differential between our highest cost and our lowest cost plants, and it's about 50%. We're moving production or optimizing our production within those lower cost facilities. Between the – call it the mechanical side of things, Andrew, the closure of the plant and then the optimization of the network, you can see how we have confidence in the delivery of the 500 basis points.

With the investment set to proceed, obviously the margin expansion, maybe you can talk a little bit about when we should expect positive free cash flow? Maybe importantly, what underlying free cash flow looks like? Because ultimately, the CapEx will ultimately fall off and moderate.

Yes. And we try to lay it out that way, Andrew, is because there are some investments going on right now in the short term. But we converted roughly a 100, which we're building off of, but we know with this investment, it can get sizably better. As we think about -- what we've talked about is we'll be at about 3x leverage in 2026. That's where we peak on a leverage standpoint. You can think about our free cash flow shape going along with that. Once we peak in 2026, we'll start throwing off those positive free cash flow numbers. One thing to keep in mind is we go from 9% to 14% EBITDA margin, that's more than $100 million. From a free cash flow perspective, we already generate sizable free cash flow, we converted a 100%. Our free cash flow is going to go up by 70%-ish as we exit '26, which creates a ton of flexibility for us as we move on past that.

Yes. Let's look forward 3 years from now, give or take, you invested to modernize the supply chain. In your view, is all the supply chain work what's necessary, really just to get your supply chain back to industry standard or actually maybe potentially be above where some competitors are today? If you can maybe speak a bit to what some of the key differentiators versus others will be?

The way we would describe it is we're about to make substantial improvement to the way we're going to supply the market, the way we're going to make our food. When we do this transformation, that transformation will be done and will be done in 2026. What's interesting about the timing when we say we're going to exit 2026 with a 14% EBITDA margin, we will have first finished the transformation. There's more work for us to do as we get to leverage this new tool in our toolkit, that's why we think there's more margin coming. The way we like to describe it is we're investing to drive more flexibility and simplicity. If you zoom out, as Dave said, we're consolidating our footprint, that creates some simplicity. We're also investing in -- we invest our capital in packaging and platforms and technology, but also we're investing in our people as well. What comes out the other end? Tremendous amount of flexibility. The flexibility in what we produce. With the packaging, we'll be able to meet consumer and retailer demand because we talk about the right pack at the right price, at the right place. That's going to help us do that because we're now going to leapfrog what we are able to do today to what we could do tomorrow, and that's going to be a meaningful difference. With our new platforms, we're going to be getting out of aging technology, new technology, which will give us flexibility to make our current foods, but other foods as well. Potentially what gives us -- makes us even more excited about this is the technology that comes along with all of it. We'll be able to assess the way we're performing 24/7 because the new technology has more technology, more digitization, our ability to be more proactive, day-to-day, moment-to-moment, with the way we're actually producing. One of the key things we're doing as well is while we're investing a lot of capital, Andrew, we're also investing in our people. We're investing in capability building. We've already developed Sherry Brice, our Head of Supply Chain, created a curriculum called the WK [ academy ]. It's about broadening capability, driving engagement because ultimately, that's who's going to be running our supply chain and we see that paying off already because we haven't deployed the capital, yet you see the benefits coming through our P&L. I do think the flexibility we're going to have, the simplicity by having a smaller footprint will allow us to be more reliable for our customers, the agility we need for our consumers, but also the efficiency that our stakeholders are looking for as well.

Great. Closer in, you reaffirmed your '24 EBITDA growth outlook in a 3% to 5% range. You did revise net sales growth to be sort of at the lower end of -1% to +1% range for -- on the 2Q call. Volume in the second quarter, I think, was down close to 5% or so. Scanner data for the first 6 weeks of the 3rd quarter, showing maybe volumes still down a couple of percent. How are you thinking about the cadence of volume acceleration through the balance of the year?

Yes. If -- again, pleased that we were able to reaffirm our guidance. I think if you think about it, coming into this year, the back half of last year, we started to see things slow down. As we gave our guidance, we saw this environment coming together. As we look at our guidance range, that was within our range of outcomes, and it's why we were able to come out in the position we were. If you look at the data and you mentioned this, we are seeing a small improvement from Q2 into Q3, but keep in mind, and we've talked about this and we talked about in our Q2 call, we executed a price pack architecture initiative throughout this calendar year. That was really about getting the right pack sizes and the right channels to our consumers. What that does, though, it does have a natural impact on price realization, both in market and within our P&L. One thing that we're looking at, historically, units and pounds moved very closely together, but this year, if you look at our data specifically, those have started to disconnect and we've actually seen units going to growth starting at the end of Q2, and that growth has accelerated into Q3, if you look at the data. One thing that we're triangulating on maybe more than we ever have, is really looking at units, volume and dollars because that's important within the environment that we're in. Beyond that, Andrew, and we talked about this, too, Gary mentioned some of the areas where we were still supply-challenged last year, like granola. That is an area where we think we'll sequentially improve as we move throughout the year. Beyond that, we also talked about our programming in the second half, and we are excited about it. A couple of things that I would mention is we had a crumble partnership that we did this year, and that's done very well for us, and then we also have a Wednesday partnership that we have around Halloween. We're excited about those things and early reads are, they're performing well in market. Those are some of the things that we looked at and are contemplating as we looked at the back half of this year.

That's helpful perspective. Thank you. You talked about 9 of your 11 brands gaining or holding share year-to-date and a 10th perhaps starting to turn the corner. Overall, WK Kellogg ready-to-eat cereal category shares declined by about 40 basis points but a lot of that is the Special K brand standing out as you've talked about, as one that's lost share. I guess what's been driving that and what action plan do you have in place to try and turn that around? It's a brand where -- and over time, tried to -- the company even under Kellogg ownership has tried to shift the -- what that brand means to consumers. And it's always hard to shift -- when a brand has meant something to consumers for such a long period of time and then you try and shift what it stands for. I'm curious how you approach that going forward?

Yes. It's a very fair question. And where we want to start is when we're operating well -- and if you take a look at what's happening in the market, we mentioned Frosted Flakes and Raisin Bran. When our flywheel is spinning, it's when we have really good innovation that ends up matching with great display and merchandising together with an idea, a campaign, maybe partnerships. When you're doing all those things, then your brand is going to work. And that's we talked earlier, why we love this business. We love the branded business. And if you think about our brands, we should love the branded business. That's when we're doing it well. If you take a look at Special K, you asked about what's going on with it, I'll do a little short term, if you don't mind, Andrew, if you look at 2024, you start the beginning of the year, and our innovation was actually short of what it was in 2023. We had more SKUs in '23 and fewer SKUs in 2024. That then impacts your display and merchandising, and that impacts not only the innovation, it impacts your base as well because when you're on display, you have both, and it drives the entire core brand as well as the innovation. So we started off slow and Special K is one of these brands where you tend to want to start off a little bit faster because people come out of the holidays, they're looking for health, that's why fitness centers are filled. So it's the right brand at that time we started off slow. Now going forward, we've already launched a new campaign at the end of Q2. It's called Special for a Reason. That's the idea. We need to get this idea going. Special K has a broad repertoire of products with a variety of nutritional benefits. The key for us is how do we reach the cohorts with our new marketing model to say, we are here for you, if you're looking for protein, if you're looking for low calorie, looking for folic acid; there's ways for us to do that with our new marketing model. That's just a piece of the puzzle. We also had a partnership with an influencer named Molly Baz. We need to get all these pieces working together. It's early days. And what gives us a lot of confidence is because we have a new marketing model, which was different than before, a way to really leverage our media and reach consumers. We have our new sales force who would then sell it in and all they're doing is selling cereal with more predictable, reliable supply. That's what's underneath all of this, but we have work to do.

On the flip side, as you talked about in Canada, you've gained 160 basis points or so of share year-to-date. What are you seeing in Canada that's making you more successful there? And can some of that or is some of that being replicated in the U.S?

Our team in Canada is doing a tremendous job right now. Our General Manager's name Tony Petitti, is leading this organization for us. Now there are similarities with Canada and the U.S., and there's differences. The similarities are the ones we talked about before. It's big, it's important to retailers, it's branded and it drives value and nutrition. All that is true. Now what's a little bit different about Canada is that it leans a little bit more towards wellness. When you think about the brands that you and I both know, the Mini-Wheats brand has twice the market share in Canada than it does in the U.S. All-Bran has 10x the market share than it does in the U.S. And they have a product called Vector, which drives out after active lifestyles with protein and fiber. So we have a nice lineup there. The team is really performing. That sales force, their direct sales force, they're growing the business across every one of their major customers. Now for us, the good news is everything we're doing in Canada is what we're doing here. In fact, we're doing it across our business. So we're transforming what's happening in Canada, all that is happening in the U.S. as well. The other thing that we think is quite good news is while we're running one integrated business, the Canada performance tells you we can also focus on a particular market at the same time. So we can do both. But you're right, Canada is doing really well, and we do think there's things we learned from them and they learn from us and we operate in an integrated way.

Great. Gross margin has been an area of strength through the first 2 quarters of the year. I think you had year-over-year margin expansion of some 250 basis points in the first quarter, underlying expansion of close to 150 basis points in the second quarter. I guess, what have been the key drivers of that gross margin improvement so far this year? How are you thinking about margin in the back half? Keeping in mind, 3Q, I know it's usually the peak sort of promotional quarter given the back-to-school season?

Yes. I talked earlier about over the last year, our ability to really over deliver actually our commitments. And one of the things that we look at, and Gary mentioned this on the on-front is the focus of the smaller company. And some of the insights that we're getting just being a smaller company, we're able to see things. And then once we see them, we're able to action against them very quickly. And so we've given the example of one of the areas that we identified quickly is there was waste that was in the P&L we organized quickly across our organization, and we are able to get that waste out of the P&L rather quickly, and that went into gross margin, went to EBITDA margin. So that's a good example. We talked about another one at CAGNY, Andrew, around -- we focused on one of our plants where it was performing below our standard where we needed to be, and we were able to drastically improve its [ OEE ], which allowed us to unlock capacity and overall get a lot more pounds out in a lot less time, which, again, creates dollars through the P&L at gross margin and into EBITDA. So quick wins through that smaller, focused, agile company and we've been able to take advantage of that. If we think about gross margin through this year, we're about 29.5-ish on a year-to-date through the first half. And what you can expect as you move through the back half, it to be relatively in line with our first half performance. So think about the run rate that we had in the first half carrying through may not be perfect each quarter, but half in line with the first half. From an EBITDA standpoint, that's where we see the seasonality in our business, okay? So in Q3 you mentioned it around back-to-school, we're investing behind our brands around the back-to-school time frame. We see the highest returns in that time frame. So that hits our SG&A line. So gross margin in line, but then our EBITDA margin will be a little bit depressed, okay? The second thing that you have in Q4 is it's our lowest volume quarter. Just seasonally, we see retailers moving to more general merchandising around the holiday season. So what you see is, seasonally, Q4 is a low volume quarter. We have the same amount of SG&A through our P&L on an annual basis. What again, that leads to is a more depressed level of EBITDA margin. So if you look at it, our EBITDA margin higher in the first half of the year than in the second half of the year, gross margin relatively steady throughout the year.

Great. Innovation, obviously, a key driver of category growth in ready-to-eat cereal. Maybe you can elaborate a bit more on the innovation plans you've got in place for the back half of this year and into '25. And how much you'd expect innovation to contribute sort of to the top-line?

Innovation, you're exactly right. That is part of the lifeblood of this category. It brings excitement, it brings news, it brings people into the store. '24 has been an unusual year in that innovation is down in the categories, down, not just in our category, it's down in a lot of categories. And part of that is certainty that the consumer is looking for. So blue box Frosted Flakes doing great, red box, Froot Loops doing great, but the innovation not doing as well, not just us, but in general, that's what's happening in 2024 so far. We expect innovation to come back and play its rightful role in the category going forward. Dave talked a little bit about the back half of 2024, where there's somewhat of a reset with [ crumbles on Wednesday ]. What we're excited about is 2025. 2025 is the first innovation set that we are delivering to the market that was created by WK Kellogg because 2024 would have been created before the spin. We've created this now as a team. And you add to that, it's the first time this is going to be sold in by the dedicated sales force. So we're excited about it. What you can expect in the innovation set is, it's across the breadth of our portfolio, wellness, taste, balance, across our brands. So we're very excited about what that's going to deliver for the business.

You mentioned, recently you got to expect peak leverage at about 3x in early, I think 2026. What do you view as the right sustainable long-term leverage level? And how are you thinking about capital allocation priorities over the next several years?

Yes. So I think it's important to remember where we started. Even into the first half this year, we were less than 2x, right, from a leverage standpoint. So that would be a relatively low amount of leverage, especially if you consider against our peer set. So it's important to understand where we started. That goes back to when we spun the company from the Kellogg Company. And we built this strategy with our supply chain modernization in mind, with these investments in mind, so we had the balance sheet to go after them and do what we need to do for this business. So I think it's important to understand the relatively low level of leverage that we're starting off at is we think, obviously, short term, we're investing in our business, right? So our capital allocation is heavily towards investing in our business. As we move forward and we exit 2026, and we talked about the flexibility and those increased cash flows in one of the earlier questions, Andrew, and what that allows us to do is really look across the various capital allocation choices, analyze them for, hey, what's going to drive the highest amount of ROI? What's going to drive the highest amount of TSR and we can lean into those things. So, our capital allocation is heavily towards investing in our business. As we move forward and we exit 2026, and we talked about the flexibility in those increased cash flows in one of the earlier questions, Andrew. And what that allows us to do is really look across the various capital allocation choices, analyze them for, hey, what's going to drive the highest amount of ROI? What's going to drive the highest amount of TSR, and we can lean into those things. So, as we look at it, we're not locking into a specific area, but we want to lean into the areas that we can drive the best value for our share owners really as we think about it. And from an overall debt standpoint, we want to make sure that we have access to capital and that it's at an affordable rate, right? So that's the balance that we run. We want to make sure we have that access, and we want to make sure we have that flexibility to invest behind those value-accretive things.

Great. Maybe a good place to wrap up the session is we spent a lot of time today discussing what you referred to as sort of the first horizon of your strategy, where you focus on building upon your foundation, independently run company, optimizing the scaled cereal business. Maybe you can touch a bit on what the longer-term vision is once WK Kellogg exits this first horizon in, call it, 2 to 3 years or so?

We talked about this last year. So last year, we would have said were 3 years away, but that horizon was a little bit fuzzy. So, we're at year-end, so now it's now more like 2. In fact, we think it's even sooner. So, you start with horizon 1, and we did talk a lot about that. In horizon 1, it's optimizing the cereal business, maintaining that stable top-line and driving margin expansion, 500 basis points of margin expansion, and we have visibility into that. So that's what we're focused on. When you get to horizon 2, we talked about we're going to continue to drive our margin. We're also going to accelerate our top-line organically and inorganically. What's interesting is the 2 horizons bleed together. As we're optimizing cereal, and we're building out our distribution system, we're building out our capabilities in media, in omni and digital. We're actually creating capabilities that are scalable and transferable. So, if you think about horizon 2, we're going to enter that horizon when that horizon actually occurs with a platform for growth because we're going to have capabilities that we think outstretch the size of our business. We think we're going to be pretty unique with a company our size, having a dedicated distribution system, a national -- actually, both in Canada and the U.S., a direct sales force, the R&D capability that we have together with the way we reach our consumers, the way we analyze data, insights, that's the platform we're going to have. When we think about that horizon too, Andrew -- I ran M&A for 20 years at the Kellogg Company, the question for us is, for which business would we be the natural parent? Where can we create incremental value. And with the platform we have, we think there'll be a lot of choices. We're hoping we're the destination for brands because then we also have our brands. It's our secret weapon. We have our iconic brands that we know can travel. So, you add that to these capabilities that we're building, we think we have a very special platform for the future.

Great. Good. Well, I think that's a great place to wrap it up. Maybe if you want to join us next door for the breakout session, plenty more questions. Management has got some time. And thank you, Gary and Dave for being with us today. Appreciate it.

It's our pleasure. Thanks Andrew.