GIS
#We lost you, Rob.
No, we have lost you again.
<UNK>, on the cost save side, it is an ongoing effort, it is an ongoing practice within the Company to look at where we are not as competitively fit as we could be and as opportunities present themselves that are material enough for investors to have a specific guidance on, we obviously disclose that as we did with Project Compass just a couple of weeks ago.
On your cereal question, <UNK>, I think part of it is just rooted in the fundamentals.
As you know, our Convenience and Food Service business is very, very targeted to the channels that we think have longer-term growth potential and so we are highly focused in schools and universities and healthcare and all of those channels are growing anywhere from 2% to 4%.
So part of it is that we are just seeing there is a little bit of a tailwind there.
And I would say the second part is that our innovation has just worked terrifically well in those channels.
We have great tasting cereals, the whole grain benefit of our Big G cereals has been extremely important to school food service operators and has given us a real competitive advantage.
We have a little over half the share in that segment.
So I would say it is a combination of some tailwind in those channels, very well targeted innovation and that is why we are very encouraged by the innovation that we will be bringing to the general market in 2016.
We think that is very well targeted, very focused on consumer trends and we are going to see revenue growth that will result from that innovation.
Rob, you've got to get on a different phone.
We are not hearing you.
So, Matt, we do continuously review where and how we are allocating our resources and resources defined R&D investment and marketing investment and capital investment so as you can imagine, we are just constantly looking very closely at that and we have, you have already heard about a number of opportunities that we have around the world in cereal and yogurt and snacking.
You will hear more later in July and we are dedicating resources to drive growth in those businesses and that necessarily means that other businesses are getting less and we have highlighted Green Giant.
The fact that we have done that shouldn't take away from the fact that Green Giant is in fact a profitable business for us.
As you said, it is a really good brand.
We are going to be bringing news and innovation to Green Giant both in the US and in international markets in F16.
So sort of reallocation doesn't mean not doing things.
We like that equity and we think there is innovation opportunity there so we will have news coming but we have just shifted some of the resources to areas that we see as higher growth and that resulted in the impairment analysis that we have highlighted.
Good question, Matt.
I appreciate the chance to clarify.
We do think that we are at normalized levels in the retail trade.
The issue is we had some build inventory at the end of last year and we had that inventory then depleted during this year.
So we ended up taking kind of two hits, one for the depletion this year and one for lapping last year's increase.
But we think as we enter 2016 the retail inventories are at a normalized level.
So let me start by saying first of all, I think that the category in the US as we look at that still declining but the levels, the rate of that decline is moderating and so we are encouraged by that and if you just look at the last 12, last three, it was a little over 3% decline for the year ---+ for the quarter, it was a little less than a 1.5% decline and okay, and I think as you know, the latest month was an easier comp, but there was actually a little bit of growth there.
So we do see the category rates of decline moderating not only in the US but we are also seeing that in Canada and other developed markets around the world.
So I think that is an important factor.
The second point is that we think we have a very good understanding for new preferences that consumers have for breakfast and we have talked about this with you many times for products that are simpler, products that are more filling, products that taste good, products that address very specific issues that consumers have like gluten and artificial colors.
And as we address those things and as we bring innovation that address those, we are seeing growth.
Our granola business is growing really well.
We think muesli is going to do really well for us.
We see products that have had taste improvements grow extremely well.
Cinnamon Toast Crunch which is the third largest brand in the category grew at double digit this year.
So I guess just the second part of my answer to your question, <UNK>, is that we think we have a really good theory on what is going on in the category and as we address it with Consumer First stuff, we are seeing a response.
To your last point, we are very single-mindedly focused on growing our business and we think we have very, very strong innovation in order to do that.
Of course it will be as we see other players in the category invest more in innovation, as we see stronger investment in media and we think we are beginning to see that, these of course are going to be very helpful as well.
So as the entire category focuses on these things and we get the consumer support back in the category, that is going to make a big difference as well.
So anyway long answer but hopefully gives you our rationale.
Yes, media is down, I will get the question first.
Media is down and what I said is our total consumer will be up so ---+ and just let me parcel that out.
So media is obviously what you see on air, what you see in digital or in print.
It will be slightly down.
Essentially think about it as flat on a 52 to 52 week basis so we lose a week obviously this year.
Importantly, it is going to be up on key growth platforms where we have clear ideas.
<UNK> just talked about cereal in the US and internationally, our snacks business in the US, yogurt in the US, natural and organic in the US.
Internationally we see it in Old El Paso in addition to the cereal businesses and in emerging markets.
So we will have media up on platforms where we have strong growth ideas.
Total consumer will be up low single digits and when I talk about total consumer, that takes in the things like in-store events.
We have many of those in emerging markets, we are doing Haagen-Dazs in-store displays in our Southeast Asia markets.
Obviously Yoplait displays in China, Yoki in Brazil.
So a lot of opportunity to get more exposure in the store itself.
And then sampling falls into it as well.
Again think about Yoplait in China as we are launching that brand.
(inaudible) a lot of our natural and organic businesses are getting supported by increased sampling this year in the US.
So there is a number of vehicles that don't hit media ---+ a number of our consumer vehicles that don't hit media that we will be increasing our investment on this year.
The only thing I would just underline on that is <UNK>'s comment on sampling.
Sampling is perhaps the most powerful penetration driver that we have and many of our natural and organic businesses are not really driven in the traditional media, they are in fact driven almost entirely by getting the product into people's mouths.
So that is a growing part of our marketing mix and one that is not really counted in the media thing so that is an important highlight for you.
So your other question was on Annie's sales contribution.
It was about 1% both in 2015 and in 2016 since we had it for roughly half a year in both instances.
So let me start my answer by reminding everyone that cereal is a $10 billion category in the US.
So it is very, very large and as you note, it has been declining for the last couple of years but still very, very large and still about one-third of all breakfasts include cereal.
So I think the first point is it is very, very important to the retailer and basically what they want from us is innovative ideas that will drive growth in that category.
And so they are very enthusiastic about the initiatives that we are bringing.
I can assure you that you will see lots of in-store support and activity this summer and going into the fall for example around gluten-free Cheerios.
Cheerios by far the largest brand in the category.
They are highly enthusiastic about that initiative and it will get a lot of support because they see it as great news for the whole category.
So I guess the first point is it is big and our retail partners really want us to bring innovation and so they are quite enthusiastic about what we are doing.
In terms of SKU proliferation, in these targeted areas of granola or protein or things like this, I mean those initiatives are working for us and so that is exactly what our retail partners want.
They see those trends as well in other parts of the store, makes sense to them and we are getting nice support from them on those brands.
Of course both of us are constantly looking at what are our top turning items, what are the bottom turners and making sure that we are pruning.
But as you have heard from us before in general, our cereal items are very high turning and so we have held our share of distribution.
We have actually grown our share of distribution over the last several years because we have really strong brands.
Does that kind of get your question, <UNK>.
I appreciate you flagging that.
This is a one-time repatriation.
It was $600 million.
We've looked at the economic cost of bringing that money back versus some of the cash needs that we had in the US for restructuring the acquisition of Annie's that we did last year.
We brought it back and while the effective tax rate charge was $79 million, it only carries a $24 million cash charge to it so it was low-cost from that standpoint.
It is a one time, it doesn't change our perspective in terms of how we are going to manage the rest of our cash internationally nor does it reflect ---+ it doesn't necessarily reflect anything on our investments internationally.
We have some robust investments internationally but we also have a very cash generative business internationally.
The observation that I would make, <UNK>, is that it is increasingly kind of a value focused category and the segment that is performing a little better tends to be the commodity oriented just frozen blocks of vegetables.
And so that is the direction that the category has moved in.
And of course as you know, we are also in the canned part of the category as well with our product so that would be an observation for you.
Having said that, we do see our portfolio is primarily more value added and more flavored and soft products and we see opportunities to continue to innovate and adapt with those kinds of products and it tends to be the higher and more innovative end of the category and so that will be our focus going forward.
<UNK>, what I would add to it in terms of learnings is that this is one area where the consumer preference has shifted pretty rapidly and a large focus of ours from a Consumer First standpoint is moving as rapidly as we can against those.
Sometimes you are constrained by the number of resources you can put against a business.
And so the cost savings initiatives that we are undertaking to free up resources to get after opportunities like this I think will allow us to be better and more adaptable and more agile as these kind of shifts happen as we go forward.
No, I mean we are eliminating the artificials and so any coloring and flavors that sort of thing now will be by the end of 2017 will be from natural sources.
