HRL
#Thanks, <UNK>.
Really, we've got stronger performance for the balance of the year in both refrigerated and specialty foods.
On the refrigerated side, the big driver there is going to be continued strong value-added sales, both on the retail side of the business and continued strong performance from our foodservice team.
And then on the specialty food side, like we said, the CytoSport business continues to do well, gaining distribution, but also some great new innovative items that are really starting to take hold in the marketplace.
Between those two things that's really what is going to offset some of the difficult market conditions for JOTS.
<UNK>, it's <UNK> <UNK>.
That's a fair statement.
In terms of expenses, obviously advertising was up on the quarter there.
As you would expect, expenses associated with the Justin's integrations that are one-time expenses.
So, certainly advertising will play a benefit for the rest of the year.
We won't have the ongoing integration charges.
But the bigger driver in all of this is really the sales momentum for grocery products.
SKIPPY continues to do really well.
Our MegaMex portfolio of products is doing well.
And then we do see some favorable market conditions that will help them out.
And then, again, the full-year benefit of Justin's.
That's really what's driving our outlook for grocery products.
I think, <UNK>, we have talked a lot about the continued growth, the migration up the value ladder, if you will, in our refrigerated foods segment.
And it occurs not just in packaged items.
We are doing it across the entire refrigerated foods organization, in fresh pork, in meat products.
It's happening everywhere.
So, we will continue to work on that and we have been very successful.
The other part to really consider is the, once again, strong growth of our foodservice business.
That's a business that continues to deliver quite well for our organization.
We don't expect that to slow down.
And then a lot of the innovation work that we are doing on the go with our party trays and some of our other items that we have developed.
So, is it a structural difference.
It certainly is a structural shift.
And we will continue to be working on that so that we do eliminate volatility over the long term.
Thanks, Rob.
To your first question, the answer is yes.
We are committed to that long-term margin guidance.
And clearly the impact of Jennie-O on just this one quarter moved us back a little bit.
But we do believe that this business is going to rebound and will emerge stronger.
It's going to be a key part of that journey in the margin improvement.
So, so the answer is yes, we are committed to that.
And to your second question, certainly there are elements of both, I think.
We're still gaining back some distribution, but you're gaining back distribution because there is consumer demand.
Again, the underlying fundamental there is we feel really good about the business.
It's connecting with consumers and it's on-trend and we expect to continue to see that.
Sure, <UNK>, good morning.
<UNK> <UNK>.
Just following up on the earlier question around Justin's, the $13 million in the first quarter does account for some seasonality in the business in the whole confectionary space.
But we do want to point out that the volume is up 20% year over year.
So, we do believe that we are on track for $100 million for the full year, and still remain very positive about that acquisition and that business going forward.
As you get to the Applegate business, our team there continues to work through the rebound of the supply situation, both on the pork side, and then that was compounded with turkey supply shortages through AI.
And as you think of that business in specific parts of the store, the walled deli space is extremely competitive.
The team is making progress there but that's been a battle.
Really, a lot of continued success in the meat case and the freezer.
Hot dogs, dinner sausage, the nuggets, the chicken breakfast sausage ---+ those items are doing well.
And we're working now on developing business in the foodservice channel, as well.
So, we think that that business is very healthy and is going to continue to do well.
<UNK>, good morning.
<UNK> <UNK>.
Thanks for those questions.
I'll try to break those down here.
The first one around avocados ---+ and you are correct, we have taken pricing increases on Wholly Guacamole.
Those prices have been in the marketplace a little while now but consumer demand remains strong for the products.
In terms of the avocado market there are a couple of things.
Prices are historically high but they are down from some of their October peaks.
The other thing to understand is that there is adequate supply.
We have a lot of supply that comes out of Mexico but we have other sources for supply, as well.
So, there is adequate supply in that space and we, again, feel really good about the business going forward.
From a grocery products perspective, our guidance is consistent with what we laid out in the fourth-quarter call.
The business is very healthy, a lot of sales momentum.
And you are right, once we get through some of these one-time expenses we will be able to deliver the guidance we laid out.
And, yes, there is a mix shift as we think about the Justin's and SKIPPY and all of those product lines that really continue to build a nice broad base in the grocery products portfolio.
So, we feel really good about what grocery products is doing and where they are headed.
I think we're on track for the 5% organic growth number.
As you go around all the differences and segments, refrigerated foods, the strong value-added sales, will continue to deliver there.
JOTS will be slightly lower.
We are going to see some volume growth but obviously we understand the market conditions.
Specialty foods will continue to perform well.
And then international grocery products are all on track for what we said they were going to do.
So, we do believe, <UNK>, that we're going to be able to deliver that 5% organic number.
We said our stronger performance will come from refrigerated and specialty, but there are some really nice sales momentum in grocery products and we don't expect that to slow down.
Specialty foods, you've got to remember that that is still a mix of CytoSport, HHL, and our specialty products group.
So, when we talk about that business we're talking across all those different categories that are performing well.
We expect that business to continue to be strong.
And even within that segment there's a bit of a balance that goes on at any given time.
We have seen some nice growth with CytoSport in some more traditional channels.
Remember, the C-store business, which is a big part of the CytoSport business, isn't measured.
The team has done a great job not only gaining distribution but creating innovative new items to meet the needs of that channel.
So, it's all of those things that are really setting it up for a strong 2017.
<UNK>, just as a reminder, fresh pork exports, they are a decent sized part of the international business.
They are not, I would say, a huge part of the overall company.
And on any given year obviously we've had strength and then we've had some challenges with pricing pressure with products coming out of the European markets the last several years.
But it does look like the markets are setting up for a strong full year.
Certainly you've got the China conditions, but I think we've also all read what's happened or what is happening in South Korea, which is a strong export market for us.
So, we do feel like it will continue to be strong throughout the year.
We are less than that, <UNK>.
<UNK>, this is <UNK> <UNK>.
Really, what's happening with the lower commodity prices is the pricing pressure that it's putting on to the sales price.
That's really where we are feeling the impact.
I think to understand what occurred in the first quarter, one of the things you shouldn't lose sight on is the bird performance, because the birds that we raise, we've talked about that we had some additional cost in those flocks.
The flocks that we raise cost more and then they provided less meat than they typically will provide, especially less breast meat.
So, the cost of raising the birds was the same price.
Yes, there is some advantage in the commodity prices for breast meat that we are buying on the outside, but it's really the pricing pressure.
Thank you all very much.
While unfavorable market conditions in the turkey industry challenged our Jennie-O Turkey Store business, the balance we have intentionally built into all of our businesses allowed us to deliver earnings growth this quarter.
Our team has a track record of delivering results and we clearly understand what needs to be done this year to deliver the guidance range we provided.
On behalf of the team here at Hormel Foods, thank you for joining us today.
