GIS
#Sure.
Yes, the consumer response has been very positive.
The baseline turns ---+ so full-price, non-promoted, sort of just true core baseline turns have been up very nicely through the first three months of that period.
Even with that one-week impact from the recall, they are up between 3% and 4%.
So we are quite pleased with how that has worked out for us so far.
Obviously the recall was a stumble, but the fundamental consumer reaction is in line, if not a little bit better than we anticipated at this point and we are going to continue to support that initiative quite heavily in the second half with more merchandising events and continued very good advertising.
Yes, Rob, as I said, the inflation flow this year is a little bit reversed from last year.
It was higher in the first half last year and then decelerated as the year went on.
This year is kind of the reverse of that, so we are certainly benefiting this year in the first half from lower inflation.
Our productivity, the $400 million, tends to be fairly stable throughout the year, so there's not really a phasing to the productivity savings.
So the result we are seeing this year is that we are seeing greater net inflation, if you will, productivity less inflation that we saw a year ago.
And as I said, we are rolling over the merchandising changes that we implemented starting in the second half of last year.
So as the year unfolds, we will start lapping that piece of it.
We will start seeing inflation accelerate a bit in the back half.
Green Giant was a lower gross margin business.
Its operating margin was actually fine, but it's lower gross margin business, so that will have a little bit of an accretive impact on our business as the year unfolds.
And there's been a lot of work at our international business and actually if you look in the quarter, international was a significant contributor to our gross margin expansion.
And, <UNK>, I don't know if you want to add a few words on what we are doing from a margin standpoint on our international business.
Yes, obviously, it's a combination of good, strong HMM efforts focusing on product mix, obviously, developed markets growing faster and emerging is contributing to part of that mix effort, but it's really just solid execution against the fundamentals.
Yes, part of our reinvestment, it was a smaller piece of our reinvestment, but the other thing you have to take into effect, Rob, we've talked about that you drive a little bit of volume in the businesses from those reformulations and you can see gross margin expansion.
I think that you've heard <UNK> Harmening talk before about our experience with Cinnamon Toast Crunch where, as we increase the cinnamon content, we did see a higher cost per unit on a variable basis, but given the volume increases and sales increases that were high single to double digits, you leverage the fixed plant and you see gross margin expansion.
So really it is a case-by-case basis, but while we do see reinvestment, we oftentimes don't see a gross margin percentage impact because of the leverage that you get on the plants.
The only thing I would add to that is those margin moves around product renovation, they are, obviously, there, but in the context of our ongoing HMM programs and the restructuring initiatives we have underway and the zero-based focus we have on administrative spending, they are relatively minor in the larger picture and that sort of explains our conviction around our gross margin expansion goals.
I will start with just reaffirming your point that I can't control the consensus.
I can try to influence it, but I can't control it.
We started the year with mid-single digit expectations and our underlying business is going to deliver that.
We have seen the $0.09 forex headwind.
I think we started the year with $0.04, so we saw that increase as the year unfolded.
I'm assuming that the consensus has that factored in appropriately.
We gave a range of $0.05 to $0.07 for Green Giant for this year and it ends up being $0.07.
Again, I don't know, in the $2.90, if people were using $0.05 or $0.07.
So I don't know what people's assumptions were or inputs were on those two measures.
And then I think the other thing, frankly, we had a strong first quarter and I think people might have gotten ahead of what the full year was going to look like.
And as we said at the end of the first quarter, we had three quarters to go.
We saw the business performing as we expected and we are still on track to deliver what we said back in July.
Yes.
Flat-ish, yes.
No, I will come onto your brand comment in just a second.
I think the issue is, in the first half, is primarily this change in the merchandising context in the category.
That's clearly what happened driven by these dramatic declines in milk prices.
And as you know very, very well, we want to be in the zone on promotion, but that's not how we try to win.
But we did see ourselves lagging the market there and we are going to adjust very carefully as we move into the second half and our performance will strengthen.
But that was clearly the reason for what happened in the category in the first half and will beyond that.
To your comment on the brand portfolio we have now, that's a really good thing.
You should like that.
We've got great core cup equity obviously in Yoplait.
We've come on very effectively over the last couple of years with our Greek varieties, but actually products like Liberte, which have a different positioning and naturalness and this sort of thing, they are participating in another high-growth segment of the market now and they are doing really well.
And the organic sector of the yogurt market is growing double-digit and Annie's is a fantastic brand to put into that segment and that was a long-held desire of Annie's when it was an independent company, but they didn't have the capability.
So actually, the fact that we have brands tailored to different consumers in different segments, some of which are very high growth, that's a tailwind for us right now.
We like that.
Sure.
Just a reminder, internationally, we focus on five global platforms ---+ cereal, ice cream, yogurt, meals and snacking ---+ and you know we've been focusing our efforts on emerging markets, first China, Brazil and then EMEA trying to broaden out our footprint.
With regard to bolt-on acquisitions, we are open to that and looking for that.
The thing ---+ the key difference between our businesses in the emerging world versus US and Canada is we are not very broad, so we believe we can find the right bolt-on acquisitions because our strategy has been to build first and foremost infrastructure and pipes in places like China, Brazil and India and then to start filling it out with those platforms.
So I think we are looking.
It is part of our strategy, but then obviously we can't control the pace because it's really what's available and what we like.
No, I wouldn't say fundamentally, no.
Obviously, the environment is changing, but I wouldn't say there's a sea change of difference out there, but we continue to mine.
Well, I will get into much more detail in February.
Suffice it to say, we are focused on this.
We had a 19% growth in the quarter.
You've got to remember there's also favorable dairy in there and there's a bunch of factors in there, but we are focused on this and we've got more levers now that we are firing on.
We've got HMM, we've got Century, we've got Compass, which will start flowing through.
So I will give more details when I see you guys in CAGNY.
Yes, no, I think ---+ thanks for the question, <UNK>.
And just to your point on soup and baking, we shouldn't lose the plot that those are doing what we wanted them to do and going to have a good soup season there and the baking business has substantially improved.
And in cereal and snacks, we did, of course, have some good news in the second quarter particularly gluten-free Cheerios, which has been very important news.
And as I said, there, the baseline movement has been very much what we expected and we really like how that is developing and so that's been really good.
The story for us in the second quarter is that our merchandising just didn't have the total impact that we had planned for it to have.
So I would say event by event, as we bring more focus and precision to our merchandising, our lifts were actually a little bit higher than we had planned, but just the frequency and the overall quantity was less than we thought with some very particular and deep reductions in our largest customer.
And so that we did not anticipate and that caused the underperformance in the second quarter versus what we might have expected ---+ fully expected.
And just the continuing intense promotional environment in yogurt.
And so as we've said now, we believe that we have addressed those as we go into the second half and as a result, performance will improve.
Well, I think you put your finger on it.
That's very much ---+ cold winters tend to be good for us and so far, it's been an unusually warm season and we think that that's a key factor with the overall market right now.
But that said, in the last quarter, our retail movement was still up and we gained shared.
So yes, we would like to see the category move a little bit better, but we are pleased that the effectiveness of our programs are working.
