General Mills (NYSE:GIS) discussed its third-quarter fiscal 2024 results in a recent earnings call, highlighting modest growth expectations and a disciplined approach to market challenges and opportunities. CEO Jeffrey Harmening underscored the company's steady performance in North America retail and the pet segment, while noting the complexity of external factors affecting future results.
Pricing strategies and market share growth were key points, with the company gaining traction in certain categories like Pillsbury and fruit snacks. Challenges in international markets, particularly China and Brazil, were acknowledged alongside the potential gradual benefits from SNAP benefits and improved on-shelf availability.
Key Takeaways
- General Mills expects Q4 sales to be similar to Q3, with several external factors at play.
- Improvements in the pet segment, especially in wet pet food sales, are promising, but further actions are needed for the Wilderness brand.
- The company remains disciplined in its acquisition strategy, seeking growth opportunities in pet food and snacks.
- Market share has grown in the dough, meals, baking, and fruit snacks categories, with momentum in Nature Valley.
- Challenges in bars and yogurt categories persist, alongside economic pressures in China and Brazil.
- Corporate expense reductions were due to lower incentive compensation and recall insurance recovery.
Company Outlook
- General Mills anticipates a modest benefit from SNAP benefits and on-shelf availability, with clearer insights into fiscal 2025 expected in June.
- The company aims to regain top-line momentum while maintaining profit and loss discipline.
Bearish Highlights
- The trade expense benefit from the previous year will impact Q4 results mechanically.
- China and Brazil markets face headwinds from reduced store traffic and increased commodity prices.
Bullish Highlights
- Consistent growth share in many categories and gains in Pillsbury and fruit snacks.
- Encouragement from the underlying performance improvement, especially in North America retail and pet segments.
Misses
- Bars and yogurt categories have not performed as well, indicating room for improvement.
Q&A Highlights
- Pricing changes are in line with pre-pandemic levels, attributed to input cost inflation.
- General Mills reports market share growth in about 45% of their categories.
- The company emphasizes the value proposition of their brands, catering to consumers' varied preferences for bulk and discount purchases.
In conclusion, General Mills' third-quarter fiscal 2024 earnings call presented a picture of a company navigating a complex market environment. With a focus on discipline and strategic growth, General Mills is positioning itself to adapt to changing consumer behaviors and market conditions while capitalizing on its strong performance in key segments. Investors and market watchers will be looking forward to the company's next update in June for a clearer view of the fiscal year ahead.
InvestingPro Insights
In light of General Mills' recent earnings call and their efforts to manage market complexities and growth opportunities, several InvestingPro metrics and tips provide a deeper understanding of the company's financial health and stock performance.
InvestingPro Data:
- Market Cap (Adjusted): 39.41B USD
- P/E Ratio (Adjusted) as of Q2 2024: 15.1
- Dividend Yield as of Q2 2024: 3.4 %
InvestingPro Tips:
1. General Mills has been recognized for its shareholder-friendly actions, as management has been actively buying back shares, signaling confidence in the company's value.
2. The company has a strong track record of returning value to shareholders, having raised its dividend for 4 consecutive years and maintained dividend payments for an impressive 54 consecutive years.
Investors might find these insights particularly relevant as they reflect General Mills' commitment to shareholder returns and financial stability. Additionally, the adjusted P/E ratio below the industry average could suggest a potentially undervalued stock, while a solid dividend yield highlights the company's appeal to income-focused investors.
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Full transcript - General Mills (GIS) Q3 2024:
Operator: Good morning. My name is Audra and I will be your conference operator today. At this time I would like to welcome everyone to the General Mills Third Quarter and Fiscal Year 2024 Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] At this time, I would like to turn the conference over to Jeff Siemon, Vice President of Investor Relations and Treasurer. Please go ahead.
Jeff Siemon: Thank you, Audra, and good morning to everyone. Thank you for joining us this morning for our Q&A session on our third quarter fiscal 2024 results. I hope everyone had time to review the press release, listen to our prepared remarks, and view our presentation materials, which we made available this morning on our Investor Relations website. It's important to note that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions. Please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which may be discussed on today's call. I'm here this morning with Jeffrey Harmening, our Chairman and CEO; and Kofi Bruce, our CFO. Let's go ahead and get right to the first question. So, Audra, if you can get us started, please.
Operator: [Operator Instructions] We'll go next, oh sorry, we'll go first to Andrew Lazar at Barclays.
Andrew Lazar: Great, thanks very much. Good morning, everybody.
Jeffrey Harmening: Good morning, Andrew.
Andrew Lazar: Hi there. Jeff, in the prepared remarks you mentioned the expected impact in the fourth quarter in terms of reported results from the lapping of the trade expense benefit last year. If we put that aside, which sort of seems like more mechanical. How do we think about momentum for the company in the fourth quarter in terms of what you'd expect in terms of in-market performance and consumption right as the company looks to really build momentum going into fiscal ‘25? Would you expect sort of an acceleration from what we saw in fiscal 3Q or something similar to 4Q?
Jeffrey Harmening: Yes, thanks Andrew. And I would agree with you. The timing of the trade phasing is more mechanical in nature. So I think you're right about that. You know, more broadly, you know, I would say is, I mean, we're encouraged by the third quarter results in the improvement that we saw in underlying performance, particularly the level of competitiveness in the North America retail and improvement we saw in pet. And as we said, you know, said kind of going into the quarter in the back half of the year that there we thought there would be three external factors which would, you know, play a role in our performance. The first was lapping of pricing of last year. We thought, you know, we'd see a benefit from doing that. We're seeing that benefit in the third quarter. The second is that, you know, lapping the reduction snap benefits from a year ago, which we said we'd probably start to see in March and April. And there's a little bit of evidence to suggest that we're starting to lap that and see a little bit of benefit. And then the third would be lapping on shelf availability. And so those are the three factors we've seen, you know, the first play out a little bit in our third quarter results. So we are encouraged. You know, I would say is that outside of the trade phasing kind of mechanical issue you referenced, I mean, we're assuming that our fourth quarter in terms of sales would look about like the third quarter in terms of year-over-year performance. And it's hard to say exactly because we have inventory movements and things like that. But our expectation would be that it would look pretty similar to the third quarter. But I would also say that there are a lot of moving pieces right in the fourth quarter. And we just have to see how those moving plate -- pieces play out in terms of the external environment.
Andrew Lazar: Got it. Got it. And then obviously Pet was a significance source of upside to organic sales versus at least sort of street expectations. What really drove the outperformance and I guess more importantly do you see this as sustainable? I didn't know if you had like an all channel consumption number for Pet this quarter and whether you see that sort of continuing to improve sequentially from here? Or should we not get ahead of ourselves based on what we saw on 3Q. Thanks so much.
Jeffrey Harmening: Yes. Well, the third quarter of Pet results were pretty good, I mean, which is to say that they're better than maybe even we expected. The movement was a little bit better and, you know, paced by a life protection formula, which was up, but also Tastefuls our cat dry business, which also shows some improvement as well -- as well as an improvement in our wet business. We still have a lot of work to do in Pet, and we know that. And particularly with regard to Wilderness and specific channels, what I feel good about the third quarter is what it shows that the area that we put emphasis on, we've seen [Technical Difficulty] and certainly improvement, which tells us the Blue Buffalo equity is good and that we're working on the right things. And on Wilderness, we kind of know what the challenges are and we know what to do to get it back on track, you know, but it's not going to take a month or two to get that back where you want. It's going to take a couple quarters. So I'm not going to get ahead of myself. I don't think it's time to declare a victory on Pet, even if we're encouraged that the things that we have done have seemed to work the way we wanted to. I would note the other thing on Pet is that we drove some good profitability increases in the quarter. Our productivity levels are quite high in Pet, and we had a lot of disruption costs during the pandemic that we've had to get out. And we're in the process of doing that. And you see that in the results in the third quarter. So really pleased by that. We're kind of getting our feet undressed from an executional standpoint. So while I'm encouraged by the third quarter, I think it's probably a little bit early to say, kind of, what's going to happen from here on out, but we do see some green shoots in Pet.
Andrew Lazar: Great. Thank you so much.
Jeffrey Harmening: Yes.
Operator: We'll move next to Ken Goldman at JPMorgan.
Ken Goldman: Hi, thank you. You know with the understanding it's too soon to quantify or really even discuss next fiscal year. I just wanted to clarify something at first. And that's at CAGNY, I believe you said you were hoping for a year, even though it's too early, that was relatively benign. And with the understanding, again, no numbers at this time, I assume, what does relatively benign mean in the context of your longer term algo? And I'm asking because you have easy comparisons in Pet, you're hopefully still performing well in market. You said previously you'll have H&M savings above 4% or you hope to. Inflation should be you know disinflationary for lack of a better word. You're going to get help from lapping snap. I could reel off a lot of potential positives into next year, but you weren't yet ready to kind of say it would be on algo and I'm just trying to get a better sense of, you know, a month later than CAGNY you're in a little bit of better position to be somewhat more specific about how to think about maybe some of the puts and takes for next year?
Jeffrey Harmening: Well, Ken you reeled off a lot of things we said at CAGNY, so please to hear that. And you're right, the -- you know, when I say, you know, the benign environment, what we hope to be, I guess it would, with regard to a couple of things, you know, hopefully with regard to inflation, we still see an inflationary environment. It's 4% now. It was, you know, double-digits last year, and long-term, it's been kind of 2% to 3% and so hopefully we're headed in the long-term direction as we look at next year we'll certainly give guidance in June on what that exactly looks like. But to the extent we can have a more benign inflationary environment and a supply chain environment we don't see the disruptions we've seen, combined with good productivity, that's a good start. And I think then the question for us, we still really haven't answered yet, even a month after CAGNY, is how exactly are some of these external factors going to play out in the fourth quarter, as we lap SNAP and as we lap on-shelf availability and private label and some of our smaller competitors. Those things are a little bit, I would say too early to call, but I will say the third quarter played out largely as we expected and the benefits of lapping pricing played out as we expected. And so it may be completely unsatisfactory. But I'm not going to comment on F ‘25 at this time other than to reiterate our productivity is good. We've seen inflation is slowing, although there still is inflation, and we'll know a lot more about what to expect out of the top line performance in a couple of months.
Ken Goldman: I knew going in I'd be partially unsatisfied, but that was helpful. Thank you. And then quick follow-up, you mentioned that, and just now, again, you mentioned SNAP reductions coming in the U.S. In a number of states, a decent chunk of those reductions have already been lapped. I don't know if your data would show this, but I don't mean to put you on the spot, but is it fair to say that you've seen improvements in these states? Or is it just a little more complicated than that? I'm just trying to get a sense, because so much of what you're talking about depends on a little bit of that macro and how consumers react?
Jeffrey Harmening: Yes, the answer to your answer -- the short answer is yes and yes. And I'll explain, I mean, the first yes is that, yes, we have seen a small benefit in the states where we've lapped the SNAP benefits. And so we have seen that. But I think it's important to remember a couple of things, one, that'll take a while to play out. It's not as if there's one event and it just kind of happens and there's a cliff change. The other is that that benefit is not huge. I mean, there is some benefit, but it's just not a -- it's not a huge benefit. The other yes is you said there's some complicating factors. And the answer is of course, I mean, because we're lapping pricing and pretty soon we'll have on-shelf availability changes. So there's just a lot of factors in the environment that make it a little bit noisier than a perfect correlation. But the short answer is we're seeing a little bit of benefit in the places where we've lapped the SNAP so far.
Ken Goldman: Thank you so much.
Jeffrey Harmening: Yes.
Operator: We'll move next to Max Gumport at BNP Paribas (OTC:BNPQY).
Max Gumport: Hey, thanks for the question. So first on Pet, it looks like the action plans you discussed for the Pet segment last quarter are starting to bear fruit. So on wet pet food specifically, I think you inflected from a minus double-digit decline in 2Q to growth in 3Q. I was hoping you could talk about any early signs of success you might be seeing with these more value-oriented multipacks? And how they may or may not inform your view of what the '24 pound bag could be doing for Wilderness over the coming quarters in pet retail? Thanks.
Jeffrey Harmening: Yes, I would say on the wet pet food side, we certainly have seen improvements, you know, whether it's all the way back to growth or not. I mean, I'm not sure it's all the way back to growth, but it's -- but we certainly have seen improvements and we've importantly, we've seen the improvements in that in the wet pet food business in the places where we got our price points back in line with what we thought would be beneficial. So that's good. We haven't gotten them back everywhere yet. So that's still a work in process. And I think that'll play itself out in the fourth quarter. But we are encouraged that the actions that we took that we thought would have a benefit are having the benefit that we thought. And so some like Yogi Bear there. But that is -- so that feels good. How that relates to 24-pound bags of Wilderness, I guess, I would say on Wilderness, I think it's going to be more complicated than just that. I mean, we need to do -- we need to get back to advertising Wilderness with a message that's going to resonate to consumers. We have some ideas on that. We're working on that now. That'll be important. And then working with the Pet Specialty channel in particular, where Wilderness has had a challenge and they want to work with us and we want to work with them. And so that's positive, but we have some more work to do in that channel. And then there's some SKUs that we need to bring back. So I wish Wilderness were as simple as getting 24-pound bags in, but I think it's going to be a little bit more complicated than that and take a little bit longer. But we are encouraged by the fact that what we have diagnosed on wet pet food and then the actions we have taken have largely played out the way that we thought.
Jeff Siemon: Max, this is Jeff Siemon. I just add a point on the -- you mentioned you know net sales on wet food were up and that we didn't include that in our prepared remarks. That was true. They're up modestly. There's some inventory differences as you look at the individual sublines. So retail sales on wet food are still down. They're moving. They're better, but we still have some work to do to get them all the way to bright. But you were right that from a net sales standpoint, they were up slightly in the quarter.
Max Gumport: Yes, I think I saw that in the slide deck. And then one follow-up would be just given the clean balance sheet and the continued emphasis on portfolio reshaping, I think it's safe to assume you're actively looking at acquisitions. I think past commentary would suggest you're focused on snacking and pet food categories and also businesses that play in your eight-core geographies? That said, I'm just curious, given some of the recent industry news, how you might view Ice Cream, especially knowing that it is one of your global platforms? Thanks, I'll leave it there.
Jeffrey Harmening: No, sure, thanks for -- I appreciate the question. Yes, on portfolio shaping, we really haven't changed our approach to portfolio shaping. We were pleased with what we have done and the 20% change we've made so far. We also know there's more to do both in terms of acquisitions and divestiture to get back to the growth levels that we're looking for. But we've been looking for a while, and you know, it's important to note that we have been and will be very disciplined when it comes to looking at acquisitions. And you know, we're only going to do things that make sense for the shareholders, not just to chase a growth goal. And we remain disciplined over that over the years. And the place that we're looking at things that will be growth-accretive. And certainly, you know, Pet is a place that we like, you mentioned snacks. There are some meal categories we like as well. And so there are a number of places where we could go that would be either in categories we're in or tangential to categories and geographies where we feel like we've got some competitive advantages. I'm not going to talk about the recent announcements in Ice Cream specifically, I'll leave that to our competitors. I don't talk about M&A and particular deals. We like our Ice Cream business. I mean, Haagen-Dazs is a great brand and that's a super-premium brand and it's growing nicely. It's good in Europe, it's really good in Asia, and so we, you know, it's one of our five global platforms, so we obviously like the category, but particularly we like Haagen-Dazs. And that is a super-premium brand that's playing in growth spaces and we feel very good about that brand.
Operator: Next, we'll go to Chris Carey at Wells Fargo.
Chris Carey: Hey, good morning. So, just one follow-up and another question. Jeff, you mentioned in response to Andrew's question that fiscal Q4 revenue should look similar to Q3. Were you referring to the consumption or actual organic sales growth in the quarter?
Jeffrey Harmening: I was referring to the consumption growth, because as we look at it, because of the timing of some of our expense phasing, there were probably about a 3 point headwind on what we report. But I was -- what I was referring to was the consumption, which is really the most important piece. The others, not that it's not important, but it's an accounting catch-up and mechanical in nature, as Andrew suggested. So what I was referring to was the sales out, if you will.
Chris Carey: Yes, perfect. Okay. That's what I thought. And Kofi, just on, you know, clearly sales were better-than-expected. Gross margins, I think were a bit light relative to street expectations, namely given positive pricing, easing inflation, strong productivity. Can you just expand a bit on maybe some of the key factors in the quarter that offset some of those positives? I think, you know, inventory work down, the volume deleverage relative to the year ago growth? Just any context on those items and how durable they might be into your Q4 and potentially a bit more medium term? Thanks.
Kofi Bruce: Yes, sure. I appreciate the question and I think you've got the plot on the key drivers. The only thing I think would be helpful to add, just to give you some additional perspective, is that the inventory absorption, which was frankly one of the side benefits of supply chain stabilization as we've been able to take down our levels of inventory we're carrying and while that was a benefit to working capital and cash flow it was about a 70 basis point headwind on gross margin, which I think would probably close most of the gap that you're referring to.
Chris Carey: Okay, perfect. I'll leave it there. Thank you.
Jeffrey Harmening: You bet.
Operator: Next is Rob Dickerson with Jefferies.
Rob Dickerson: Great, thanks so much. So this might be just kind of a broader question. You know, I know within NAR, I guess, kind of calling out a little bit more pressure, let's say, in meals and baking and snacks. Then maybe there's a little bit more strength in other areas. So I'm just kind of curious, like broadly speaking, right? Now that we've kind of gone through what we would all consider a fairly material pricing phase. Have you seen any kind of, like general shifts, let's say, in this category consumption? You know, like consumers seem to be, kind of, consuming more -- a little bit more here than they used to relative to other areas? I'm just trying to kind of consider any types of shifts and kind of the value proposition, some of your brands, and also just the category positioning? Thanks.
Jeffrey Harmening: Yes, I'll start with. Let me start in a little bit different place and I'll work my way back maybe to your question. I would say one of the shifts we've seen since the beginning of the pandemic is more food consumption at home. And so food consumption at home is a couple points higher than it was going into the pandemic. So roughly about 86% of food is served at home. And the reason for that is because food served at home is such a great value. And it's about 4 times less expensive to eat at home than it is to eat out at a restaurant on average. And so as Americans have felt the challenges with inflation, part of the way they deal with value is that they eat food at home rather than out. And obviously, we were a great source of value when it comes to that. That's actually probably one of the biggest shifts. Interestingly, private label shares are about the same now as where they were before the pandemic. In the categories that we're in, private label is about 10% of the category. In fact, they're down 10 basis points from when the pandemic began. And overall, food and beverage is about 19 points. And so we haven't actually seen a big shift when it comes to value there. When it comes to specific categories, one of the things I'm most pleased with our performance over the last few years is our ability to hold our growth share in half our categories over that time. And so that's so it's broad-based. And, you know, we've seen some big gains in our business, like Pillsbury, refrigerated dough, which has done quite well and, and meals and baking over time. The same with fruit snacks. Both of those businesses are up 60% over the last few years. And we've consistently gained market share in those businesses. Obviously we haven't in Pillsbury this year, because private labels getting back on shelf, but over the course of time. So we feel really good about that. We've had some struggles in bars as you well know. But I can say one of the things I'm pleased with as we look at our business now, Nature Valley is back to growing share. And it was even before one of our competitors had a big recall. So it's not a recall induced kind of activity. We've had some good new product innovation in Nature Valley. Our marketing is working in Nature Valley. I think we shared some of that at CAGNY. And so that's one category where we had struggled where we feel like we're getting a little bit of momentum. And then, you know, on yogurt too, it's an area where we have struggled as well, but we, you know, we have done well. We've got yogurt protein out there right now, which is off to a nice start. And so, but broadly speaking, I would say we haven't seen huge changes category by category in consumption.
Rob Dickerson: All right, fair enough. And then just quickly, you called out in the prepared remarks, just a little bit of pressure, maybe from the consumer in China and also Brazil. And you just kind of give us the quick kind of stay of the union, what you're seeing in both countries. That's all. Thank you so much.
Jeffrey Harmening: Yes, sure. In -- you know, in China, the biggest factor in our -- we did say that the biggest factor in our China business, I think it's important to note, is in our Wanchai Ferry frozen dumplings where a year ago, Chinese consumers were kind of on lockdown. And so there was a lot of at-home consumption. So we're lapping that. And so the comparisons are very, very difficult. And that's the biggest driver of our challenges in China, if you will. The other driver, though, is that we have had the store traffic in China is down a little bit from where it had been before. And I think that's probably a function of the Chinese consumer feeling the pinch of an economy that has slowed down over the past year. And so, but the bigger driver is actually the Wanchai Ferry dumplings. And in Brazil, it's kind of similar to the U.S. for the point now we're lapping pricing from a year ago and our hope is we start to see the Brazilian -- our Brazilian business start to stabilize here over the coming quarter or two. That's been the big challenge. They've seen huge commodity price increases in Brazil. And so our input costs have gone up quite a bit in Brazil. And we're lapping those now in Brazil, kins of, as we are here in the U.S. And my hope is that as we head into our fourth quarter that we start to see our comparisons, kind of, ease a little bit.
Rob Dickerson: All right, super. Thank you so much.
Operator: We'll move next to Robert Moskow at TD Cowen.
Jacob Aiken-Phillips: Good morning, everyone. This is Jacob Aiken-Phillips on for Rob. Two quick ones, so I understand the trade timing 3% impact this year in 4Q. But last 4Q, you talked a lot about inventory reduction headwinds, and you said about 3% then. So did you ship ahead in 3Q? Or is there some other factors that we're missing?
Jeffrey Harmening: Yes, in the -- let me answer that to the best of my ability. But if I didn't get the question exactly right, ask it again and that I'm not trying to avoid it. I would say in the third quarter, we had built inventory a year ago. And this year was pretty benign, I would say. Our -- if you look at our Nielsen data in North America retail, you see a 2 point difference. Some of that is due to the fact of unmeasured channels, we're growing faster than measured channels and only the balance of it is inventory growth. So our inventory is in a good position as we head out of the third quarter. And as we look at the fourth quarter, it's tough to say what's going to happen. You're right, last year, we blood inventory, several points worth of inventory in the fourth quarter last year. And so you may ask, well, does that mean you're going to build it this year or not? The answer is I'm not really sure. It's really difficult to predict inventory changes. What I would say is that we feel like we're in a good place as we end the third quarter with our retail customers, whether that's in North America retail or whether that's in Pet. We don't have too much inventory, but I think we have enough. And so what to -- we're not expecting any change in the fourth quarter. And to the extent there is a change, we think it would be modest, but we'll let that play itself out.
Jacob Aiken-Phillips: Yes, you got the question. Thank you. And then, [Kofi] (ph), another one is, so reduction in incentive comp. I know you have the trade timing headwind in 4Q, but -- are there any changes to your expectations of investing in media or in the brands going into 4Q? Or is it how you're expecting last quarter?
Kofi Bruce: No, I think -- I appreciate the question. I would say one of the things that worked really well, and I want to make sure it didn't get lost in the strong profit performance in the quarter is that we have continued to invest behind our brands at a mid-single-digit rate. I wouldn't expect that to change as we go into Q4 even as we're driving better-than-expected profitability in a year in which we've seen obviously some top line pressure. So -- from where I sit, I think what you're hearing is we'll continue to keep our foot on the pedal. I don't expect a material change. So I'd expect around the year out somewhere in the mid-single-digit range of increase on our media, which will put us comfortably ahead of our top line expectations.
Jacob Aiken-Phillips: Thank you so much.
Jeffrey Harmening: You bet.
Operator: We'll take our next question from David Palmer at Evercore ISI.
David Palmer: Hi. A question on North America retail and what you're looking to see from that segment as you think about fiscal 2025. Obviously, that's a key high-margin segment, and there's some big categories that make a lot of money for you in that segment. And I'm wondering, for those of us that are watching the scanner data and thinking about how you'll be thinking about the business and whether you can be sort of on Algo for fiscal '25? What should we be looking for that will give you that confidence? For example, do you need to see volume approach flat year-over-year? Are there a couple of categories that you're reviewing a little bit more closely than others.
Jeffrey Harmening: Yes, I would say, you know, on -- without giving guidance to fiscal ‘25, still trying to kind of answer the tone of the question. I guess, I would say we'll look for continued improvement in North America retail and hopefully, we'll see it in Pet too. But North America retail since you asked about that, hopefully, continued improvement. We saw a little bit in the third quarter, and we'll see about what happens in the fourth quarter, particularly in volume improvements. And we'd hope to see that broadly. I mean, of course, we always look at the cereal category and what we're doing there and snacks in Mexican. Some of our big categories, but I would say that would be broadly speaking, that's what we're looking for. So we'd like to get back to a position of growth as a company, and we're going to continue to invest to do that to make sure we invest in marketing to make sure we grow. And so in a year where we hope productivity is still strong and we talked about earlier, and inflation is still there, but hopefully, relatively benign. Hopefully, we can reinvest some of that productivity back into marketing spending, so that we can continue to grow the top line of the business, because we've been very good in the middle of the P&L. The biggest challenge, obviously, this year has been with growth. And so it's really important for us as a company and not in particular, but everybody really to get back to growth.
David Palmer: And then you were talking about early signs of a SNAP -- lack of SNAP subsidy headwind, I should say. What are you seeing? Is there -- is that something you're seeing in the last week or two? Is it specific to certain categories that you think are a little bit more family oriented or meal oriented? I mean what are you seeing there? And thank you.
Jeffrey Harmening: Yes, the first thing a couple of important points about SNAP, I said them earlier, but I'm going to reiterate, because I think they're important. The first is that -- we have seen a little bit of a benefit, but it's not going to be a step change. It's not going to come in and, frankly, week-by-week, and it will roll in over time. And the benefits we're going to see from those are going to be modest. I mean, there may be -- we think there will be a benefit, but I think they're going to be modest in nature. The other thing I guess the other context I would add, and I'm not going to go category-by-category, but the benefits do accrue category-by-category. And so they're not going to be even from one category to the next. And so as we look at it, yes, we'll aggregate them because that's the easiest way to do it. But some categories are different than others. And certainly, when you're serving families as we do some -- for our portfolio, those are categories that tend to benefit from SNAP benefits more than others.
David Palmer: Thank you.
Operator: We will go next to Pamela Kaufman at Morgan Stanley.
Pamela Kaufman: Hi, good morning.
Jeffrey Harmening: Good morning.
Kofi Bruce: Hi, Pam.
Pamela Kaufman: Just in thinking about some of the headwinds that may be abating over the couple of quarters, do you have an estimate of how much you think that Snap may have impacted your overall growth or industry growth? And also just the improvement in on-shelf availability, how much of a tailwind can that be to your growth outlook?
Jeffrey Harmening: Yes. I think, Pam, I'm not going to -- this would be unsatisfactory, so I apologize, but I'm not going to try to quantify either one of those two things only because there are so many there are so many moving pieces. We've got -- we are lapping pricing as well in the external environment. But I would say the SNAP benefits are pretty modest. They're there, but they're pretty modest. But look, I'll take a modest benefit at this point. The on-shelf availability should also provide a modest benefit to us. But again, that will be over time and it won't be a one-time event. And that will really start kind of the end of April, beginning of May, we would start to see the benefits of that into our first quarter. And so I think as we talk to you in June, hopefully, we'll give a little bit more satisfactory answer about kind of what we're seeing because we will -- we have seen both of these things play out for a period of time.
Pamela Kaufman: Okay, understood. And then just on corporate expense, on a pretty notable reduction year-on-year. What's contributing to that? And should we be extrapolating these levels going forward?
Kofi Bruce: I appreciate the question. The primary driver in the quarter was a reduction in our incentive-based comp accrual as we obviously are tracking a lower top line performance and comping last year. where we had to increase it pretty sizably on outstripping our top and bottom line performance last year. So I expect this to be a benefit that we'll see specific to the quarter. The other item is related to our recall insurance recovery, which we booked in the quarter. So those are specific to the quarter, and I wouldn't expect that to be part of the base expectation going forward.
Pamela Kaufman: Okay, thank you.
Jeffrey Harmening: You bet.
Operator: We'll go to the next question from John Baumgartner at Mizuho Securities.
John Baumgartner: Good morning. Thanks for the question. Jeff, I wanted to come back to the value-seeking consumer. And in North America retail, the areas where volumes have still been lagging. You look at cereal, go, frozen snacks where category pricing is up one-third to 50% in 2019. What can we do at this point? Any levers left to maybe enhance the volumes that are a bit more independent of the macro. I mean can you go to the pack change as you're doing in pet, can you innovate or market consumers into higher prices? Or is it just that some categories overshot on pricing, relative to what consumers can bear and now it's down either taking prices the other way or just waiting for consumers to grow into these levels financially?
Jeffrey Harmening: Yes. Thanks, John. A couple of things I would say. The most important thing I would start with is that what you see in all the categories you mentioned, is a significant change in input cost inflation. So we've been the recipients of quite a bit of inflation over time. More than 30%, in fact, I think, is 32% over the past three years or so. So the cause of prices going up really has been input cost inflation and the prices that we received. As we look category-by-category, we don't think we're out of line to where we were pre-pandemic actually. And I think as important as consumers seek value, they seek in a variety of ways. The most important way are the benefits that our brands provide. And so part of the reason that we continue to invest in media and marketing and will continue to do so is that our brands have value and what they provide materials, provides heart health. And Pillsbury provides quick, easy, convenient meals at dinner time. And so that's the most important thing. But then more specifically, consumers also look at value in different ways when it comes to pricing and some want to buy in bulk. So it'd be going to a mass store to buy big boxes of cereal, for example, for the lowest price per ounce, where they'll be buying 80 packages of fruit snacks at a time at a warehouse store. Otherwise, they feed the soccer team. Otherwise, they may be stopping off at a dollar score store, a discount store to buy a one pack at a time. And so there's not one monolithic consumer. Every consumer looks for value in their families in a variety of different ways, including trying to feed their families at home. So we don't think that our pricing has gotten ahead of inflation. In fact, it hasn't. And we feel good about where we are in the categories. I think what we have to do is lap some of the one-time on self-availability, things we've seen now, we've lapped pricing. And once we do that, we feel good about our ability. And I think you see that in the third quarter. We -- in North America retail, we grew market share in about 45% of our categories in the third quarter, which is a significant improvement from what we had seen in the quarter before. And hopefully, as we lap some of these other factors, snapping on self-availability, we'll see continued improvement.
John Baumgartner: Alright. Thanks, Jeff.
Jeff Siemon: Okay. I think that's all the time we have. Before we wrap here. I think I'll pass it back to Jeff for some closing comments.
Jeffrey Harmening: Yes. So well, thanks, everyone, for the time this morning. I guess I would start by saying we're encouraged by our third quarter results, particularly improvement in competitiveness in our categories. We're competing effectively and we thought that we would. And a lot of this is driven by lapping some pricing from a year ago and our ability to continue to execute well. We have innovated well. We have grown distribution. We have done -- we're executing our plan well. As we look to the fourth quarter, I mean, there are some timing issues as we talked about with expense -- the timing of expenses. But broadly speaking, we would expect our third quarter sales to kind of play out in the same magnitude that we saw in the third quarter. And our goal really now is to gain some -- regains some top line momentum as we continue to be very disciplined in the middle of our P&L. And we think that combination of factors will serve us well. We'll see how it plays out. There are a number of factors in the coming months, including this lapping of the SNAP benefit as well as on shelf availability and we'll be able to come to you in June with certainly a clear picture of what we expect in fiscal '25 and what some of those benefits are that will lap over the coming couple of months.
Jeff Siemon: Great. So we'll wrap it there. Thanks, everyone, for the time this morning. Feel free to reach out if you've got follow-up questions throughout the day. Have a good day, everyone. Thanks.
Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.
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