General Mills, Inc. (NYSE:GIS) 2022 Barclays Global Consumer Staples Conference September 6, 2021 12:00 PM ET
Jeff Harmening – Chairman and CEO
Conference Call Participants
Andrew Lazar – Barclays
Can everyone hear me okay? Perfect. Excellent. Well, welcome back everyone to our fire-side chat with General Mills. With me today is Chairman and CEO, Jeff Harmening. Welcome Jeff and its truly great to be back in person again.
It is great to be back in person.
Yes, the rain in Boston is good. Forget the doom and gloom outside. It’s all sunny inside here. Well, I think we all agree that General Mills has been among the most agile I think of the staples companies over the last couple of years. And a lot of that is due to other structural changes that have taken place with the company, whether that be some of the portfolio change, some of the pretty significant organizational change that’s gone on and we look forward to digging into some of those topics, among others as we go forward.
Q – Andrew Lazar
Maybe just to, sort of, kick it off, Jeff, we’ll toggle back and forth between some broader thematic questions and some closer and operational ones. But to start, maybe I want to dig into — I think what I see is some underappreciated organizational moves that General Mills has made more recently? And how you see those maybe with some specifics and examples, maybe enabling the company to compete more effectively, which clearly the company has done over the last couple of years?
Yes, Well, thank you, Andrew and I think you’re right, I mean, we’ve made some significant organizational changes and, — look — and I understand why they could be maybe not giving us full credit, it’s hard to put in a spread sheet and algorithm, but it doesn’t mean that they’re not important.
And as I think about the things that we’ve done, specifically in North America retail, we have changed from kind of functional silos to having sales and supply chain and marketing all under one leadership and what that’s allowed us to do is to become more agile, and whether that’s agility with regard to pricing and changes or supply chain and handling disruptions, I mean, those changes alone in North America retail, which I’ve taken quite a bit to implement, have ever really increased our agility and alignment across the organization, but that’s not the only thing that we have done.
We also made significant changes to our operations outside of North America to reduce the admin footprint we have, but also to increase the number of distributors we had outside of core markets. And that’s really important, because in doing so we believe that we can accelerate our growth in those markets and we know for certain that we can reduce our administrative footprint. And you started to see that in the fourth quarter, with the results that we delivered on our fiscal fourth quarter, ending in May.
In addition to that, we moved our convenience store business over to North American retail, which is helped with our snacking business and we’ve seen good growth out of that.
And then, finally, I would say our — strength, we created a strategy and growth organization led by Dana McNabb, a fabulous leader and what that’s allowed us to do is what’s more to the future with an ever present M&A organization and portfolio shaping organization. But also we’ve created a disruptive growth organization, which has allowed us to look into the future and develop some of our own internal growth capabilities.
Right, thank you. General Mills has done a great job of covering the dollar impact of inflation through pricing and productivity, but maybe you could talk a little bit about the dollar and margin impact that you’ve also seen, really from supply chain disruption, which you don’t price for, but in theory, should be sort of more transitory and sort of gettable as margin opportunity over time?
Yes, I agree with you. I’m smiling now because the transitory — the T word, I mean, no one’s talking about transitory but, but I think that — but you’re right, I mean, the — we’ve experienced cost to serve our consumers above inflation, and but — and they’re significant, so, versus pre-pandemic, probably 200 basis points of cost. So, I’m not talking about a small amount of costs.
And these are the things that are very, very difficult to price for and their inefficiency is caused by the current volatile environment. So, I’ll give you a couple of examples. Let’s say a supplier can’t deliver oils or starch or some other ingredient to us and we have to have a line down in a manufacturing plant. Well, we still employ those people and so we still have those costs, which is just inefficient, or let’s say that we have those people in our plants, but we can’t ship a full truckload of product to a retail customer. And in that process, we only ship a half a truckload and we get to get fined because we only ship a half a truckload because it’s inefficient for our customers and it’s also inefficient for us to do, but we do it because we want to serve consumers and serve them well.
And so these are really real inefficiencies that over time — and the key is over time, we’re highly confident will come out of our cost structure, but what that requires is a normalized supply chain and unfortunately, supply chain is not quite normalized yet.
Seems like the industry is making progress, but gradually, I think is the word I hear a lot.
And I can corroborate that. We see that as well. I mean, our supply chain is, is serving our customers and consumers better than it was six months ago. But it’s nowhere near that 98% to 99% efficiency that we saw pre-pandemic. So, even though it is better, there is still a long way to go until it is good in the absolute — even if we’re outpacing our competitors, it’s still a long way from ideal.
And what tends to get overlooked, but we all know how critical sort of the people component running a business is. Goodness knows, I could never do this without my team up here.
That’s for sure. Are there things that you’ve done at the leadership, team level, you and your direct reports that kind of made it easier to just sort of pivot quickly and be as agile has you have been? And maybe you can talk a little bit better about that, because you’ve talked about in the past that sort of comment better to be agile than right, I think, is your comment, and this kind of plays into that.
It does. So, we have an exceptional leadership team at General Mills, which I think requires two components. The first is talent and we have talent across the Board, whether it’s our segment leaders, or whether it is functional leaders on the team. And so it’s exceptional talent. But it’s also very diverse talent and diverse from a number of points of view.
I mean, certainly in terms of gender, it’s diverse, also as ethnicity, but importantly, we have a number of people on our team who have come in from the outside, in addition to people like myself, who have been at General Mills for a very long time. And so when it comes to things like data analytics, we brought in somebody from the outside and made tremendous progress.
When it comes to supply chain, what we’ve done, we brought in somebody from the outside and enjoyed a lot of success. And so we have really great talent, but in order to have a team.
You need more than talent, I mean, the other thing I would say is that we’re all rolling in about the same direction. And the reason for that is that we all believe in the accelerate strategy, which we’ve developed. And I certainly hope those of you in the audience here and our investors who are listening, I hope you all believe in it too. But what you need to know for certain is that our leadership team believes in it.
And so if you have talented people going in the same direction; that gives you a fighting chance and then what we’ve done over the course of the pandemic is we’ve changed the cadence with which how we operate. And you’re right, it’s better to be clear than, than to be certain in this environment. And so what we have done is we now get together every week and we talk to things that are tactical, we get together anything monthly, and we talk about things that are tactical and a little bit more strategic, and then quarterly get together and talk about things that are more strategic. And so what we do now is we have a cadence for among our leadership team in a company where we can do both things that are tactical in the here and now, while maintaining some strategic visibility. Because time has proven that that company should go through tough stretches like we’ve all been through the last two and a half years, the companies that prevail are the ones who not see better through, but invested through those difficult challenges.
With respect to portfolio reshaping, last three to four years, there has been a large, but I’d argue let’s talk about part of the story of General Mills looking to accelerate its growth, which was in portfolio change. I think you’d said Jeff, that where you are now gives you the confidence in at least the lower end of your 2% to 3%, annual or long-term organic sales growth range versus maybe below that prior to these moves. But with that some further portfolio moves that could shift to the higher end. How do you prioritize these sorts of moves as some of the lower-hanging fruit so to speak, has been divested already?
So, as we look about kind of where we are versus a pre-pandemic, pre-pandemic, we’re growing somewhere between 0% and 1%, and coming out on a normalized environment, hopefully, it gets normalized. On a normalized environment between 2% and 3%, so not inflationated.
And that has two components to it. One is that we are competing more effectively than we did before. But the second part, which was you highlighted is portfolio reshaping. And so we’ve announced, I think, seven transactions in the last 13 months. So, we’ve been very active and we’ve executed well against them, announcing them as one thing, but executing well against them is actually the important part.
And so what we have done with our portfolio and competing effectively as far as the 2% to 3% growth range. And we certainly like to get to the 3%-plus growth range, which we think can create a tremendous flywheel for investors because if getting to that kind of growth rate on the topline, will make it much more probable that we deliver the mid-single-digit operating income that we promised all of you who are who are listening and that that opens up a variety of opportunities to create shareholder value.
And so what we see in front of us is continued portfolio reshaping. We probably only need another 50 to 100 basis points. And we’ve come a long way so far. So we don’t need to come as far — we don’t need to go as far as we’ve already come. And we’re looking for opportunities consistent with what we’ve done before things that are either in our current categories or adjacent to our current categories.
The Tyson Pet Treats acquisition is a great example of that in terms of size, we’d be looking for so many Annie’s is a really good example a few years ago of things we’ve done.
We recently made an acquisition and food service, which is going to be a fast grower for us as well. And so looking to add on to our portfolio and continuing to look at divestitures and divestitures are difficult to execute, but we’ve executed those well either — whether it’s helpers in the U.S. and suddenly sour whether it’s to play.
In Europe, we feel very good about both the things we’ve acquired, but also that the things we have divested have not only helped us in our growth algorithm, but also helps us put our attention on the things that are the most important for us.
As this fiscal year progresses, knowing there’s still some lag that’s typical in pricing and cost to sort of maybe start off the year, I guess, when should we start to see not only sort of profit dollars being covered, which you’ve started to do very effectively, but some margin recovery has well, or is the divestiture of helper that you recently mentioned, maybe too much of an offset, to see actual margin percentage recovery happen as this fiscal year unfolds?
Well, I’d like to be able to tell you with certainty, but it’s a pretty — it’s still a pretty volatile environment and our Head of Investor Relations says, not to give guidance two weeks before earnings. So, I probably won’t do — I probably won’t do that, haven’t said that.
There are there are a couple of things that will help us recover our margins. And one of them we touched on already, which is just the supply chain efficiencies that we’ve experienced over the last couple of years. And while that’ll come — while that will come back, and it has come back slowly, I’m not anticipating it’ll come back all the way in this fiscal year. So it may be transitory, but it’s a long train, it’s a longer transition than any of us would hope for.
The second would be, you’d have to believe that the volumes are going to stay high. We and others in the industry have had experienced a lot of inflation and therefore taking a lot of pricing. And so you’d have to hope and plan for volumes remain relatively high.
Now, if you look at scanner data over the past 13 weeks for us and our peers, volumes remain pretty robust. So that part of it seems to be coming in quite well. But it has to be a combination of the volume coming in, as well as a return of supply chain to normalcy, which I don’t see quite yet that would help us have our margins fully recover.
Sticking maybe with the like-for-like forward, there’s sort of this industry narrative out there, right among many investors, who live in a supply chain constraints ease and cost rollover, admittedly, from extreme highs, that food companies will somehow be sort of forced to sort of promote back such that they don’t see the typical margin recovery, right, that comes with the other side of the cost inflation curve, historically.
And I’d love your thoughts on this and whether do you see sort of General Mills of discussions with key customers having changed much, maybe even more recently, over the evolution of this particular inflation cycle?
I have heard this narrative and some questions. So, the — I think underlying that is a really a question about as promotional spending to come roaring back? I think that’s actually what the what the concern is, I think if you to believe that, I think you have to believe three things. The first, you would have to believe that history doesn’t repeat itself when it comes to times of recession, which is to say that as we look back at prior recessions, promotional spending hasn’t come roaring back, you’d have to believe that something was different this time.
I — would submit to you that in the current environment, just a level set, everybody, pricing our categories is up almost 90% over the last quarter, and our pricing is up roughly 20%. If you look at scanner data, promotional spending is down 20. So where we are today is a far cry from a decrease. In fact, it’s actually been accelerating over the last few weeks.
So, you have to believe — you’d have to believe that history is not going to repeat itself. And what we see is that history actually is repeating itself relative to the last recession we were in where people stopped eating away from home as much they started to eat at home more and, and things like that.
The second thing that you’d have to believe is you’d have to believe that all the supply chain inefficiencies that we talked about earlier, you’d have to believe that they kind of almost instantaneously go away. I don’t believe that. That’d be great for margins, but I don’t believe that’s going to happen. So, you’d have to believe you’d have to believe that.
The third thing you’d have to do is not only would inflation have to stabilize, but you would actually say that it has to decelerate and I don’t mean — I looked at the jobs report from October, I think there are a lot of — I think unemployment is quite low still. It seems to me that the chances of an environment where inflation decelerates is quite low, maybe it will stabilize, that would be nice. Maybe it will stabilize, but it strikes me that it’s going to be quite low, that it’s not going to decelerate. But I think you have to believe all three of those things.
Not one, I think you have to believe all three of those things to believe that a promotion that a very negative — at least, my standpoint, a very negative promotional environment is going to ensue in the short term. I don’t believe those, but those out there listening believe those three things, then you would probably say that that would be the case.
Yes, helpful thoughts. Thank you. I guess looking at your core and profitable cereal business, the company has been gaining share consistently, really going back well, before the supply chain issues and your main competitor, I think it’s kind of five years running. You’ve been gaining share consistently.
I guess what gives you the confidence that that General Mills can continue, particularly with the structural shifts coming at your competitor in North America cereal, which I suppose could, in some ways, also being an opportunity of sorts for General Mills.
And again, I’m thinking outside of near-term, just as you know — as another company just gets product back on the shelf. Obviously, there were some unnatural share gain more recently, but I’m talking about that longer term history here of share gains, and what potential some of the structural issues or structural changes that one of your competitors could mean going forward.
Yes, I’m confident in the strength of our cereal business. And I mean, that’s what we’ve gained share five years in a row. So, I suppose part of the competence is a part of that. But also, we know what we have, we have great brands. And we’ve been investing behind those brands; we’ve been investing behind our capabilities. And those capabilities are related to innovation or pricing, or brand building, whether it’s on our core or new products, I would say, my — the confidence that we continue growing cereal, which we have done for five years in a row, it really gets down to, we believe in the category, it is a great margin contributor for us, we’ve been able to grow it a little bit and gain a little bit of share
And so that’s where the confidence stemmed from. It’s certainly not arrogance, but it’s a confident that we’re doing the fundamental things right. In the categorical category, in order to succeed, I think the biggest challenge for us is going to be staying focused on what it is we do well, because there’s a lot of stuff swirling in the environment. And we know what we can’t do is follow somebody else’s game plan or worry about somebody else’s game plan, what we need to do is stick to the one that we have, which is winning. And to make sure that we continue that path, that is the most important thing that we can do. And there’s a case to be made that we could get distracted, but I can assure you that we will not.
And your perspective on just from your experience, large structural changes in organizations, whether it be splits or separations and such, can also come with a pretty significant amount of disruption, organizationally as well? I’m just curious on your — you’re going through that, but obviously others are?
Well, that was as we’ve done divestitures, that’s one of the things we focused on was making sure we didn’t have those distractions happening was I’m really proud that we’re still growing market share and over 60% of our categories four years running, even with doing some divestitures, but it’s not easily done because it when you — at least as I look at our business, I’m not going to speak for anybody else’s. But when I look at our business, there are a lot of there are a lot of synergies that may or may not be available that may not be seeable by all of you. And I’ll give you a couple of examples.
So, we use we use extrusion technology to make breakfast cereal. We also use extrusion technology on Blue Buffalo and we gain a lot of synergies back and forth. Intellectual centered, maybe not constantly but intellectual-centered back and forth. We use a lot of thermal processing technology and soups and yogurt. We do the same technologies used to make what pet food I mean, there’s synergies there. There are synergies for us between things like CPW, which operates outside of North America and our North American cereal business.
In fact, we work a lot — on a lot of technologies and innovation together. And so it may not be obvious, but across categories and across geographies, there are certainly a lot of synergies that we see from our business and that we depend on.
If we could chat about pet for a moment, if we can. Certainly I’ve been pleasantly surprised at just how robust this business has been even now that the company is well beyond sort of that initial distribution opportunity that you had when you first purchased the brand. Recent volume trends have been a little less robust as they’ve been previously and how to get a sense of how much of this is purely capacity related? And if so I guess why has Blue’s shelf about availability been below that of others?
Yes, so we’ve been — well, for starters we’ve been very pleased with our pet food business. I mean, we have a billion dollars more sales in pet food now than we did four years ago and high margin pet food sales. So, we’re quite pleased with how it has turned out and we have had some challenges recently with keeping up with supply frankly, because we’ve been growing so fast.
It really truly is growing pains. I guess for context, yes, we’ve been having trouble keeping up with demand, but we’ve been growing double-digits, including the last quarter.
So, it’s not as if we have fallen off a cliff, we’re just having trouble keeping up with high demand and so the challenge that we’ve had recently, while still growing, I think in Nielsen data 13%, this quarter, the challenges we’ve had are really related to supply constraints and in particularly acute in treats, and which we will get more capacity on in January, so we have a finite timetable and we’ll get a lot more capacity for treats.
But then in our dry dog food business, which is going to take some quarters, it’s not going to take weeks, it’s not going to take a quarter, but some quarters to get the capacity that we need, because we’ve been growing that business quite well over the past number of years.
Maybe sticking with Pet, I mean, how do you think about the runway left in this business? And to the extent that it’s based on more, let’s say whitespace opportunities such as wet or treats, I guess, what evidence do you have thus far that these extensions can succeed and deliver what you’d expect. As they do move a bit further outside of the core dry dog segment?
Yes, I think we have tremendous upside potential in pet even just thinking about it organically. As I said, we’ve grown a billion dollars in sales over the past four years and we’ve doubled our household penetration. Household penetration is always a signal of how fast can you grow something. And for us, we see a tremendous runway in wet cat food and wet dog food. And recently we changed the brand — completely changed the branding and the formulation of something was called Healthy Gourmet, I think. And we changed it to Taste Holes [PH]. And we’ve seen that business grow almost 100% over the last couple of quarters, and the only reason it didn’t grow 100% is because we couldn’t keep it in supply. And so we’ve rebranded that business and we’ve reformulated that business and we’ve seen a lot of success from that.
In our Treats business, we’ve grown quite a bit with the acquisition of Tyson Treats and we’re now going to be branding that Blue Buffalo, which is rolling out the store shelves now. So, the combination of like the nudges and Blue Buffalo was a combination of we think the best brand in pet food category was some of the best products in the pet food category.
We haven’t even started to innovate in that space yet. So, there’s a lot of runway to innovate in treats. Also not an all the different channels you can be in with treats because we’ve been so capacity constrained.
And so in the treating business, we’ve grown double-digits, and that was kind of one hand tied behind our back, we haven’t been able to innovate, we haven’t been able to rebrand like we want, we haven’t had the capacity, all of which will be coming online starting here in the second quarter and the third quarter of this year.
And then there’s a chance for us to expand and geographies. We have a test going in China right now, the second largest pet food market in the world. It’s like $7 billion or $8 billion in sales, I think and it’s growing at 20% a year and the premium section is growing quite a bit. We have a test with Blue Buffalo, won’t have — it won’t have an impact on fiscal 2023 results, but the testing we’ve done indicates that it can be successful in China as well.
So, our ability to be successful in the Miller market outside of North America, we feel great about especially the second largest market in the world. And there’s probably an opportunity to go into other formats. We have lots of innovation coming in the third quarter, and I promised our Investor Relations person and Bethany Quam runs Blue Buffalo, I would not talk about at this conference, but I will talk about that later. But we have some really exciting innovation coming in the second half of the year, both new forms, but also innovation in our core business. So, look for more things coming in the next few months on the Blue Buffalo.
Great. On a recent competitor conference call, I think the concept of value in what is still a very robust overall pet food category came up several times. I guess what have you seen in past times of sort of macro pressure in the premium sort of pet food space? I mean, my sense is right now your biggest concern is just making more. And I assume everything else is kind of pretty far down the list, but I’m curious what you’ve seen in past times of economic pressure in terms of the premium pet food space?
Yeah. As you say, our focus on pet now are two things. One, making sure we can make enough and innovating. There actually is no left after that. In terms of what we’ve seen during past recessions, you’re – I think that’s a really good question. But before we bought Blue Buffalo in fact, it’s one of the things we lucked out because we bought Blue Buffalo in February of 2018, and many people were thinking at the time that the US would go into recession shortly after that. It turned out not to be the case.
We ended up with a pandemic instead. But we thought we were going to a recession, and so we did a lot of looking at historically what had happened to pet food during recessionary times and premium brands didn’t suffer all. In fact, Blue Buffalo grew quite nicely during the last recession. And so we’ll see if history repeats itself, but there’s not a lot of evidence to suggest that consumers are going to trade down significantly during a recession in pet food, especially when they care so much about their pets.
And then broadly speaking, why do you think volume elasticity has been below normal thus far, even with all the pricing the industry has taken? Is it simply consumers trading into at-home meeting? Or is it the industry’s ability to start to refill trade inventory levels? Or something else or all of those things combined?
Yeah. I think there are two main reasons why we haven’t seen the elasticity’s, maybe that we thought we would, and maybe that investors thought we would there are a couple. One is the supply chain disruptions. And you’re not going to get a lot of promotional volume when you’re just having trouble keeping stuff on the shelf every day, which we all are still in the industry. And I think we covered that earlier in this conversation. But the other factor really is trading from away from home to at home, and we have really seen trade from away-from-home eating to at-home eating.
And even if consumers are decently well off now and unemployment is reasonably low, consumers aren’t very nervous about what’s coming in terms of the economic environment. And certainly, those consumers at the lower end of the economic period have already started to experience the challenge that inflation presents. And so it is the combination of consumer shifts from away-from-home eating to at-home meeting combined with the supply chain disruptions that we have seen, and I think we’re going to continue to see for the foreseeable future.
Okay. I want to make sure we cover the sort of a white space approach to innovation that General Mills is taking, where the company is increasingly looking more five, 10 years ahead, sort of like the work with synthetic biology and the bold culture launch among others. I guess what can you tell us here about how unique maybe this approach is? And do you think – at least among your direct packaged food peers?
Yeah, I’m excited about the path we’re taking toward innovation and looking to the future. It’s one of the things I talked about investing for the future that we’re doing as a company and we’re doing it in a variety of ways and whether it’s consumer spending, which is up or investing in data and technology for connected commerce world or how we’re thinking about innovation and looking a few years out.
And so as we think about our innovation spectrum, if you think about all the way from innovating on the core to M&A, in between that is your own disruptive innovation, and we’ve done that through 301 Inc. for a number of years investing in small companies. But now because we have the strategy and growth team that I mentioned at the very beginning of this conversation that Dana McNabb is leading, we have our own disruptive growth group. And so this group is tasked with kind of working as entrepreneurs would work and their own separate organization. They have their own separate way of working, and their job really is to find consumer problems and try to solve them.
And whether those consumer problems are things like climate change and while we’re looking at synthetic materials like we have in biology, which we have in bone culture, or whether that is our consumer health-related challenges. And we launched a brand – we’ve launched a brand called Good Measure, which is low in sugar and really is going to be helpful for diabetics or whether that’s the personalization food or other trends that are coming.
We have this group of people who are fully dedicated to nothing but trying to find disruptive growth opportunities. And again, it’s not going to manifest itself in fiscal 2023 in terms of the shape of our P&L. But we’re certainly hoping that three years from now and five years from now, we could be on a stage like this and talking even about one of the things that is wildly successful.
And so I’m really excited about what it’s doing. Even if it doesn’t contribute to this year’s results, I think it’s an indication as a company that we’re not only focused on executing the here and now, but also investing in the future and what will be.
I want to talk about sort of relative shelf availability a bit. While virtually the entire industry really is still dealing with supply chain disruptions, as you talked about, and I think progress for most has been sort of gradual at best, maybe can talk about the company’s relative shelf availability and how that’s been an advantage for the consistent share gains that you’ve achieved?
Yeah. So we do look at relative on-shelf availability. And I think in eight of our top 10 categories in the US are the availability of our products is better than our competition in North America retail. So there are two that are not, we’re losing share. And both of those, only two we’re losing share on really. And then pet food is lower, and we’ve lost a little share in the last few weeks in pet food.
And so we’re really pleased with the way our organization is functioned in order to do well in this kind of environment, even if it’s below our normal expectations. It’s better than our competition. Our customers tell us the same thing. In fact, you asked earlier – I forgot about this, you asked earlier about how our conversations with retailers is going. Everyone assumes that the first thing we talk about with our retail customers is pricing. That’s actually not true. The very first thing we talk about is supply.
I would tell you that, most of our retail customers are more concerned about can they get product and can they get it delivered on time all the time, then they are about pricing. And so our ability to be better than our competition in this regard has really been helpful to us and it’s not been an accident. It’s a reflection of not only the skill of our supply chain people, which is really robust, but also the fact that we’re knitting together our whole organization as we talked about, this new organization structure where you have a general manager who has accountability for supply chain and sales and marketing and so trying to tie that all together and make us more agile has really led to our success in being better than our competition in most cases with regard to supply chain.
I assume your comments around sort of retailer conversations are particularly true. Now that maybe some retailers are sort of on one side of the house, right the discretionary side has been a lot tougher, and a lot of the profitability right now is coming from the grocery side?
Yeah, that’s right.
I would assume, you don’t want to mess with that too much.
No. And – look consumers are – even when times get tough, consumers are going to eat, and they tend to come in to grocery stores more and mass merchants more, and so the number of trips increases and so our retail customers, whether they have other discretionary goods or not, consumers are coming into their stores more. And they feel the same inflationary pressures that we do on things like wages, for example.
And so our conversations with retailers about pricing have been really productive. It doesn’t mean they always agree with us. But we’ve led our categories and growth in most of our categories, and we have a lot of expertise. We’ve been innovating well. And so actually, I found the conversations would be quite productive when it comes to pricing.
Maybe just one or two more, we’re getting – running a little low on time. But I guess I’m curious where there’s been some two and half or three years sort of into this pandemic, do you have a view on whether or not your categories or brands within them can actually grow faster than they were growing pre-pandemic on a more sustainable basis in light of all the new households that have come back in the past few years? I get played back to me a lot, well, hey I can understand why the base would stay higher than it was pre-pandemic. But why would these brands grow any faster off that higher base going forward once things normalize?
Wow. Yeah. Sure. That’s the question of the day. There are a couple –
I’ve been waiting three years for the answer still we’re not in normal mode.
No, we’re not. But I would say, there are two things that – with regard to how fast we’ll grow when we kind of get out of this period. There are two things that have a great deal of confidence in and what I will speculate on, and the two that I have a high degree of confidence. One is that the portfolio shaping we have done will land us in a better place coming out of the pandemic than when we went, so I’m highly confident of that. When you look at all of the things that we have acquired and all the things we’ve divested, I am highly confident that our portfolio shaping will put us in a better place.
The other thing I’m highly confident is that in our organization, we talked about some of the organizational changes that we are executing at a much higher level than we were even going into the pandemic, and I’m highly confident that will increase.
Then with regard to consumer behavior, it’s quite speculative. But what I would tell you is almost always, almost always, the best indicator of future growth opportunities are where you see gains in household penetration. So look for gains in household penetration. And the R squared on that, speaking statistically, is quite high on household penetration gains and the future prospects of a category or a business.
And so to the extent, there are some categories we have seen significant increases in household penetration, things like Totino’s for example. So General Mills had – before the pandemic had eight brands with $1 billion in retail sales, eight. And now we have nine, and Totino’s is the ninth. And am I confident Totino’s will continue to grow and grow faster coming out there? Yes, I am, because we’ve grown the number of households for Totino’s.
And so as we look, those businesses where we’ve seen growth in the number of households Pillsbury would be another great example. It’s a local business. It’s not a global business, but we’ve seen tremendous growth from our Pillsbury refrigerated dough business, and we’ve gained households through the pandemic.
Those are a couple of examples. You think, well, we have seen accelerated growth, and we’ve grown the number of households. Consumers seem to be very satisfied. So I would suggest that those things will probably grow faster. There are probably other categories where it’s been primarily frequency based. Those probably don’t have as great a chance of growing. And so that is a speculation, and we can come back hopefully in a year from now, maybe two, and find out how those things played out.
Great. All right. We’re going to have to cut it off there. Please join us in the breakout session. And Jeff, thank you so much for your time.
Yeah. Thank you, Andrew.
Thank you. All right. Perfect.