JM Smucker at BofA Conference: Strategic Growth Amid Challenges

On Tuesday, 11 March 2025, The J. M. Smucker Company (NYSE: SJM) presented at the BofA Securities Consumer and Retail Conference 2025. The management team expressed satisfaction with the company’s performance, highlighting strong earnings and growth in key brands. However, challenges with the Hostess brand and potential tariff impacts were noted, indicating a cautious approach going forward.

Key Takeaways

• Strong Q3 performance with growth in brands like Uncrustables and Cafe Bustelo.
• Hostess brand underperformance due to category challenges and execution issues.
• Plans for $100 million in synergies from Hostess acquisition, with $70 million expected by fiscal year-end.
• Commitment to delivering $1 billion or more in free cash flow.
• Cautious approach to pricing adjustments amid potential tariff impacts.

Financial Results

• Organic Net Sales Growth: Achieved through strategic pricing and volume mix.
• Earnings: Strong, driven by disciplined cost management.
• EPS: Stabilized around $10 per share, aligning with initial expectations.
• Hostess Synergies: On track to realize $100 million, with $70 million expected by fiscal year-end and $30 million in fiscal year 2026.
• Free Cash Flow: Aiming for $1 billion or more, supported by business growth and reduced capital expenditures.
• Debt Reduction: $800 million expected this year, with an additional $500 million over the next few years.

Operational Updates

• Growth Brands: Uncrustables, Cafe Bustelo, Milk Bone, and Meow Mix continue to drive growth.
• Hostess Brand: Focus on stabilizing through improved execution, distribution expansion, and innovation.
• Uncrustables: Revenue projected to exceed $900 million, with future growth supported by facility expansions.
• Marketing: Bilingual campaigns for Cafe Bustelo to attract younger consumers.
• Pet Segment: Innovation and affordability emphasized to counteract softness in the treats category.

Future Outlook

• Green Coffee Costs: Additional pricing actions planned to offset rising costs, considering price elasticity.
• Uncrustables Growth: Expected to surpass $1 billion, aided by facility expansions.
• Capital Expenditures: Elevated in 2026 and 2027 but expected to decrease as a percentage of net sales.
• Leverage: Aiming for a leverage ratio at or below three times by FY 2027.
• Tariffs: Monitoring closely, with a cautious approach to pricing adjustments.

Q&A Highlights

• Government Regulations: Advocacy for federal-level regulations to ensure consistency and cost management.
• Retail Channels: Building share-winning plans with retailers to adapt to consumer shopping trends.
• Consumer Trends: Emphasis on partnerships with retailers to manage growth and cash flow effectively.

For a more detailed understanding, readers are encouraged to refer to the full conference call transcript.

Full transcript - BofA Securities Consumer and Retail Conference 2025:

Peter Galbo, Packaged Food Analyst, BofA: Good morning, everybody. Welcome to the twenty twenty five iteration of the BofA Consumer Conference.

We are in Miami for the third year in a row. My name is Peter Galbo. I am the packaged food analyst for BofA. I wanna welcome everybody to the conference this year. We are delighted to have the folks from the J.

M. Smucker Company back with us this year. Last year, Mark, I think you were receiving an honor in in congress or you were bestowing an honor in congress?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: One of our retiring government relations leader was getting a was getting an honor from congress. We’re we’re glad you’re back. That’s pretty cool. Thank you.

Peter Galbo, Packaged Food Analyst, BofA: We’re glad to have you back in Miami, but that’s a cool that would that’s definitely a a very cool honor there. So with us today, we have Mark Smucker, Chairman and CEO, as well as Tucker Marshall, CFO, both back with us this year. So guys, thank you again for being here. We we really appreciate it.

Mark Smucker, Chairman and CEO, J. M. Smucker Company: Our pleasure. Thanks for having us.

Peter Galbo, Packaged Food Analyst, BofA: Mark, maybe just to kick off, you just reported your third quarter. You raised guidance on earnings. You’re kind of back to where you thought you’d be from an EPS standpoint at the start of the year around $10 a share. And Tucker, you gave some kind of helpful puts and takes on fiscal twenty six back at CAGNY, some additional thoughts a few weeks ago. So we’d just love to get kind of both of your perspectives coming out of the quarter just as a starting point of the discussion.

Mark Smucker, Chairman and CEO, J. M. Smucker Company: Yes, sure, Peter. Obviously, we’ve been in the public here several times over the last several weeks with earnings in CAGNY and what have you. But we’re actually very pleased with our results. I mean, if you look at we’ve delivered both organic net sales growth in total with some net also supported by some pricing growth. We’ve had strong earnings that have been supported by just disciplined cost management.

We’ve continued to support our brands through our marketing efforts. And so we’re very pleased with the performance. It’s mostly driven by our growth brands, Uncrustables, Cafe Bustelo, Milk Bone, Meow Mix and the like. So overall, when you look at our legacy portfolio, it really is supporting growth and the company. On Hostess, Obviously, we’ve been pretty clear that we haven’t been satisfied with our performance on Hostess.

Some of that has been some challenges in the category in total, some with our own execution. But we feel very good about the plans we have in place and the five pillars that we’ve outlined to get that brand back to growth, and at least starting with stabilizing it. So overall, portfolio is in really good shape. We’ve worked really hard to get this portfolio where it is today, and now supporting it and growing it is obviously the number one goal.

Tucker Marshall, CFO, J. M. Smucker Company: Yes. Peter, we outlined at CAGNY our perspectives for next fiscal year. And really that was in the spirit of being very visible and transparent about the elements that we were considering, particularly on the bottom line, because we have a lot of belief in the fact that we can deliver an above algorithm year as you consider base business momentum and you work through the benefits of cost and productivity and realize synergies and mitigate stranded overhead and pay down debt. But we’re also acknowledging that we continue to live and operate in a highly inflationary environment with green coffee costs. And we are going to have to continue to navigate this environment through additional pricing actions while also navigating the price elasticity of demand factors that will be a headwind to volume growth year over year.

And so that was really just in the spirit of outlining how we were thinking about next year.

Peter Galbo, Packaged Food Analyst, BofA: Great. Thanks. And we’re gonna get to to coffee in in a bit. I’m sure we’ll we’ll have a lively discussion there. But but Mark, two two kind of higher level topics I just wanted to to touch on with you.

First one is tariffs, right? Obviously, it’s been in the news quite a bit. Just a broad update in terms of how you’re thinking about tariffs news, any sort of reciprocal tariffs, you have a not insignificant sized business in Canada, just in how those discussions and how you’ve been thinking about it?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: Yes. So I think with any action that would impact us from a government perspective or regulators, the current administration, we monitor it all the time. It’s changing daily. I think we have some exposure, honestly, but at the end of the day, I think we feel confident in our ability to manage through whatever comes our way. I would say that who knows what’s going to happen.

I think there’s a bit of hope that some of the tariffs might be, temporary in terms of trying to get countries to come to the table. So I think we want to manage it prudently and and as tariffs do come, not necessarily jump to conclusions right away, but make sure that we’re monitoring how the discussions are going between, you know, various parties and make sure that we’re taking the right actions to support our portfolio. You know, we might have to take pricing, but until we see, I guess, tariffs that are truly sticky, I think it’s going to be I think we just need to to to tread carefully before we start to to take actions. We want to make sure that we understand what’s really coming and what really impacts us before we react.

Peter Galbo, Packaged Food Analyst, BofA: It’s a little bit of too early to call.

Mark Smucker, Chairman and CEO, J. M. Smucker Company: It’s a little too early to call.

Peter Galbo, Packaged Food Analyst, BofA: And maybe, Mark, just the second kind of turning more broadly to the rest of the consumer. I mean, we’re getting it feels like a lot of mixed signals across companies in general, some resiliency, some weakness. Just maybe your thoughts on where we are from the overall consumer standpoint in The U. S. And maybe specifically just on the low income consumer as well?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: Yes. We do view that the consumer continues to be relatively cautious. I think they’re being careful in terms of how and when they spend their money. They’re being choiceful about the brands they buy. I think we feel really good about our portfolio because we play across the value spectrum.

I mean, if you look at pet and coffee, hostess, all of these categories have products or brands that actually reach a value consumer as well as more premium consumers. Even coffee, I know we’re probably going to talk about it in a minute, but coffee is still affordable when you brew it at home versus buying it out at a coffee shop. So we do think that our portfolio is really well positioned, but we have continued to see consistency in that cautiousness of the consumer. I wouldn’t say the consumer is struggling necessarily, but it’s just being more prudent about how they’re spending their dollars.

Peter Galbo, Packaged Food Analyst, BofA: On the low income, is there are you noticing any kind of discernible difference overall?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: I think it’s a little early to tell. I think with gas prices having come down a little bit, it will potentially support a bit of shift with some discretionary impact coming potentially back into snacking. Cautious in terms of predicting that that’s gonna happen, but I I would say we’re we’re cautiously optimistic.

Peter Galbo, Packaged Food Analyst, BofA: Got it. So that’s maybe a good segue in into coffee. It’s probably been the the most, you know, topical area of the business maybe outside of Hostess. You know, Tucker, we we’ve spent a lot of time talking about flexibility for for further pricing with where green coffee costs have moved. Maybe a sense of kind of the building blocks of where we are in coffee, how we should be thinking about it conceptually next twelve to eighteen months.

And Mark, if there’s any update in terms of the crop that you’ve seen coming out of Brazil, that would be helpful to discuss as well.

Tucker Marshall, CFO, J. M. Smucker Company: Yes. Peter, we continue to navigate an inflationary environment with green coffee. We took two significant price increases in this fiscal year. And as we think about next fiscal year, we will have to take additional pricing actions to recover green coffee costs. And our strategy has always been that we will recover the cost for, the dollar cost inflation first because of the nature of the pass through category.

And we’ve consistently done that over the years, both in inflationary and deflationary environment. And so for next fiscal year, you can probably expect some net pricing growth at the top line, but we are going to see an impact at the volume level just because of the associated price to demand factor. Historically, we’ve been about a 0.5 and we’ve performed around a 0.5 elasticity. But as we move forward, we may have to consider a higher factor just by the nature of this ongoing inflation. And we really believe what’s driving it are the supply and demand fundamentals with the associated commodity.

That’s about a fifth year tight stocks or supply against continued ongoing global demand for coffee. We don’t see any structural changes with the underlying crop. We believe that this is truly cyclical cycle back over time. But our outlook isn’t for deflation in the near term, rather continuing to live and operate in this inflationary environment.

Peter Galbo, Packaged Food Analyst, BofA: And Mark, maybe to step a little bit outside of that. I mean, is there a different, you know, there’s been obviously a large discussion about cocoa costs, but the coffee farmers, I think are paid a bit differently. Is there typically a pretty fast supply response from, you know, coffee growing regions when the price does get this high, you’ll see the farmers kind of plant, you know, more quickly?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: No. What I would say so coffee trees, right, are they don’t bear fruit for five years after being right? So it’s a little bit like grapes or wine, whatever. And so they are different. If you look at Brazil, Brazil is the obviously the largest coffee producer.

It’s the only country that has large scale farms that have mechanical harvesting. Everywhere else in the world is all generally small farms. About a hectare is kind of an average. They’re very small and everything is hand harvested. And so it’s a very manual crop.

The supply chain is very long. Obviously, being a traded commodity, there are many factors that obviously drive the price. We’ve seen usually over our winter months, we see speculation, which is not driven by fundamentals. We’re starting to get into a period as the harvest is coming, in where fundamentals theoretically drive more of the markets, the market pricing. But because it’s such a long supply chain, it’s hard to read.

So we are waiting to see how the crop continues to come in. Some of the mixed signals that we were getting around the crop are obviously led by Brazil, and those signals were they got the rain that they needed, but the rain came too late. And so that’s what drove some of these, the coffee trading houses predicting lower crops. But we’re in a point now where we need to get deeper into the harvest to really understand the absolute size of of the coffee crop. But I think, you know, Tucker touched on this.

It’s important for us to continue to use all of the financial, the derivatives, the futures, to use all the financial instruments available to us to manage our actual coffee costs so that we can deliver our financial results. And that’s really what we remain focused on. We do have offices, coffee intelligence offices that are not trading offices, but boots on the ground in both Brazil and Vietnam, so that we do obviously ear to the ground trying to understand and work with the farmers, work with the trading houses to understand what the crop is really doing. But at the end of the day, it’s all about making sure that we’re managing the cost to deliver our financial goals.

Peter Galbo, Packaged Food Analyst, BofA: So Mark, one of the interesting things that I think we looked at and have had conversations with Tucker and the team about in kind of the past two coffee super cycles, whatever you want to call them in ’twelve and ’twenty three, that elasticity factor that Tucker mentioned kind of was the case. It was a point roughly a 0.5. I guess the question we get a lot of is in these really inflationary periods of green coffee, do you see a lot of that trade in from the away from home coffee to at home? Like has that been your experience in what you’ve seen in the data? Or is that more of a predictive for this time around what you’re expecting at all?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: We haven’t seen it in the data, but what is encouraging is that the amount of coffee that is consumed at home, the number of cups consumed has been very consistent in that 70 ish, 70 plus percent of cups consumed remain at home. I think one of the trends that we’ve been seeing, particularly with Gen Z and some millennials, is a tendency to actually try to replicate their favorite coffee shop drinks at home. If you look at some of our liquid offerings, in Bustelo in particular, and in Dunkin’, those liquid offerings really support that trend because mixing pre brewed liquid or cold coffee with, you know, creamer and sugar at home or even with, you know, frost, milk or cream is something that we are seeing consumers do at home because it’s affordable. And now the tools and the pre brewed coffee are available to them. And so we feel very good that our portfolio continues to be positioned very well and to really capitalize on those trends and make sure that we can keep, the at home coffee consumer in our portfolio.

Peter Galbo, Packaged Food Analyst, BofA: The the most interesting one that we’ve we’ve seen recently is, the ready to drink protein shakes being used as a creamer for the cold drinks. So you get the protein and coffee, right, like we’re all trying to to consume

Mark Smucker, Chairman and CEO, J. M. Smucker Company: Sounds like something Tucker would do.

Peter Galbo, Packaged Food Analyst, BofA: Yeah. I’m right. So, Mark, that’s a that’s a great segue maybe into Boostello. It’s been such a a growth driver for coffee. Maybe you can just dig into why the brand is kind of seeing this level of growth and kind of the plans you have in place.

I think you introduced some new innovation at CAGNY, but kind of how do you sustain the momentum for Bustelo?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: Yes. I mentioned the liquid. I think that’s really important. Even the base business, we’ve quadrupled the brand since we acquired it in 11/2011. It’s an it’s an amazing brand.

The history, very briefly, is Cuban family here in Miami had the Pilon brand. They acquired the Bustelo brand from a family, in New York. It was it had Bustelo began in New York. And they did a nice job sort of establishing Bustelo and Pilon as, as a sort of a true Latin brand, in both, the Northeast and here in Southwest or South Florida. And what’s special about Bustelo is the branding, the packaging, the retro feel, and the fact that it’s rooted in that authentic Latin culture has really been the critical aspect of the brand.

I mean, it is the characteristics of the product are that it is very strong, very dark roasted, espresso ground coffee that stands up to, you know, lots of cream and sugar, and just that authentic heritage with the bright yellow package and, Angelina Bustelo, who is the the character, on the on the package, really speaks to to younger consumers, particularly Gen Z and millennials, and so that’s where we’re seeing a lot of growth, and then the multicultural as well. And so having now begun to do real advertising, we’ve created an entire animated world where, you know, a very, authentic Latin vibe exists, and and that continues to to push the brand out. Every all of the marketing is bilingual, so everything appears in Spanglish or in both Spanish and English. And so really keeping the the product true to its roots and the brand true to its roots is really what’s helped to drive it. Great.

So maybe we can move on to Hostess. We talked

Peter Galbo, Packaged Food Analyst, BofA: a little bit about some of the executional, you know, issues, as the integration has kind of been ongoing. Maybe, Mark, you can just talk a little bit about some of the learnings, and what specifically you’re kind of doing from an execution standpoint to drive improvement.

Mark Smucker, Chairman and CEO, J. M. Smucker Company: Yeah. Sure. So, you know, we talked a little bit about recently on the call that we still feel really good about the brand and its potential. We the divestiture of the Voortman business as well as the value brands of that portfolio allow us to focus, right? And that was part of one of the pillars was, evolving the portfolio really to maintain that focus on, excuse me, on Hostess, on the brand.

And I mentioned earlier, we did see, you know, some softness in the category in total. The convenience channel was part of that. But I will say that as we work very hard to see that brand, the integration is complete. And although we have some executional hiccups, we’re largely through those and we’re continuing to make sure that our distribution network is solid, expanding distribution both in traditional grocery as well as convenience has been driving revenue synergies is important. That has a lot to do with Uncrustables and getting Uncrustables into convenience, that’s going well early.

Actually on air here in the next couple weeks. And so really continuing to support the brand and getting that brand stable. And then as we get into new there’s new mod resets coming in in traditional grocery, and so that should also support the brand as well along with innovation, limited time offering. So it’s a lot, but it’s kind of all of the above is gonna be required to make sure we get that brand back to growth.

Peter Galbo, Packaged Food Analyst, BofA: And in terms of the leadership change that you’ve brought into Hostess, just what are the learnings maybe from the pet side that’s being brought over to try and improve on Hostess?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: Well, the leadership change in a nutshell was all about driving execution across those pillars that I just mentioned. That’s plain and simple. That’s what it’s about. When we transformed the pet portfolio, Judd was the Vice President of Marketing under Rob Ferguson, who’s now on coffee. Those two individuals were instrumental in making the tough decisions required on the portfolio as well as the investment choices on pet to really get that brand back to growth and ultimately double the profitability, at least double the margins because of all of the decisions that we made.

So given the track record, that Judd has and the momentum that he has been able to sustain in Pet gave us the confidence that he is the right leader, to manage through a lot of these issues on Hostess and really bring that brand back to growth.

Peter Galbo, Packaged Food Analyst, BofA: And just on innovation that’s coming and I think you said you’re going to turn on some marketing in in Hostess, just kind of what expectations do you have for the new products with Hostess and kind of where are you kind of prioritizing the investments?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: Yeah. Innovation is really important on Hostess. One of the things that the Hostess team does really well is fast cycle innovation. So they have demonstrated an ability to, lean in and get new innovation in a relatively short period of time, sometimes as short as six months from, you know, concept to to commercialization. The mini cupcakes and the fritter rings are two of the ones we talked about.

Obviously, the fritter rings is a is a play on doughnuts, but with sort of a, a country fair kind of vibe

Peter Galbo, Packaged Food Analyst, BofA: with the

Mark Smucker, Chairman and CEO, J. M. Smucker Company: with the fritter rings, and they’re they’re really tasty. And then the mini cupcakes are great because it’s about portion size. And if people are seeking for a bit of something sweet, maybe don’t want a whole cupcake, obviously, the portion size plays to that, and we’re really, gonna continue to drive that type of innovation because we think that the consumer is going to continue to seek smaller pack sizes.

Peter Galbo, Packaged Food Analyst, BofA: And Tucker, maybe just one last one on Hostess. On synergies, I think you’re actually coming this year than your initial expected $50,000,000 Maybe you can just remind us kind of on the cadence of synergies and how you think about the incremental opportunity next year.

Tucker Marshall, CFO, J. M. Smucker Company: Yeah, absolutely. So we are on track to realize a hundred million dollars in synergies, which was our objective at the time of acquisition, which is great. At the end of this fiscal year, we will have achieved 70,000,000 of that 100. So about 20 more than we anticipated for this fiscal year, which will leave a balance of about $30,000,000 for next year, fiscal year twenty six.

Peter Galbo, Packaged Food Analyst, BofA: Great. Okay, Mark. Now on to everyone’s favorite, Uncrustables. And if you haven’t seen, we do have some offerings in in the back there. The the chocolate hazelnut, the raspberry, the new innovations, the raspberry ones are are

Mark Smucker, Chairman and CEO, J. M. Smucker Company: Awesome.

Peter Galbo, Packaged Food Analyst, BofA: And if you haven’t seen the photos of them in Mike Dicks’ CAGNY email, I think that was everyone’s favorite, recap part of it. Mark, you know, look, the business is on track to do $900,000,000 plus of revenues this year. I think we’ve talked about, you know, the opportunity for a billion next year now that the McCullough facility is up. Where do we kind of go from here? Again, Macaul is only in Phase one.

What’s the incremental opportunity once you get a Phase two up? Any parameters we can put around kind of where that

Mark Smucker, Chairman and CEO, J. M. Smucker Company: We definitely think there’s growth beyond $1,000,000,000 We have not laid out a number specifically on that. But I mean, I believe, I know the team believes there’s significant upside. I think at some point in the future, we will be a little provide a bit more clarity on that. What I will say about McCullough is that first phase is complete. There’s a second phase planned.

All of that supports growth beyond 1,000,000,000 Obviously, the marketing, the advertising is new as of about a year ago, so that is clearly supporting the brand. Lots of new addition, there’s a mixed berry coming. I think we’ve talked about that publicly, which would be like a limited time offering. So we are going to be able to cycle through potentially some LTOs as well as more permanent SKUs like the raspberry, and really feel good about the potential for the brand even in core peanut butter as a foundation of the brand. Still lots of growth in terms of the size of the shelf set, in terms of the top line growth.

And we’ve talked about how long it took us to figure out how to make these things in a profitable and mass produced high quality way. And now that we’re doing that, we can really fire on all cylinders and drive the growth.

Peter Galbo, Packaged Food Analyst, BofA: And Tucker, is there incremental CapEx we should start to think about conceptually for a Phase two? Or is that kind of in this year, you know, as we think about going forward on on a phase two build?

Tucker Marshall, CFO, J. M. Smucker Company: Yeah. So when we laid out McCullough, it was in excess of a $1,000,000,000 investment several years ago. And we knew it’d be a multiyear journey as we built out not only the facility, but also the phases within the facility. And as Mark acknowledged, we’re finished with that first phase. So when we think about capital, it’s already been planned in our long range plan in our commentary as well about it’s going to take us several years to get down to that strategic objective of 3.5% of net sales was where our capital expenditure target.

So it will continue to be elevated in 2627%, but it will come down as a percentage. Great.

Peter Galbo, Packaged Food Analyst, BofA: Mark, maybe just on the pet, I want to perspectives on the treats category, which I think has been just weaker as a whole across the spectrum. Just what have you seen so far in terms of what’s been effective to drive any sort of incremental purchases? And what are your perspectives under why the category has been as weak as it has?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: It’s so because it’s discretionary like human snacks, that’s the primary reason why we’ve seen a bit of softness with the cautious consumer that we talked about earlier. That said, what has buoyed our business is innovation and the affordability of the base product. So if you look at base biscuits, it is still a very affordable way to reward your dog. And then the innovation has performed very well, like we’ve talked a lot about the Jif peanut buttery bites, which actually has real Jif in them. And those executions are great.

And if you think about all the different types of treats, Milk Bone plays in just about every segment, whether that’s the soft and chewy, the biscuits, the longer lasting chews, all of those things are areas that Milk Bone has the right to play and does. I think just to acknowledge, we had a bit of a softer quarter, but that was driven by some supply chain disruption that we had on the brand, which we’re past now. And so back to production and getting into back into full distribution in this quarter, which is our fourth quarter, all of that would continue to brand. So still feel really good about Milk Bone, even despite we’re seeing a little bit of a cautious consumer. If we continue to execute on the fundamentals and innovate, we’ll see that brand continue to grow.

Peter Galbo, Packaged Food Analyst, BofA: And then, Mark, maybe just to the other side of of the portfolio, cat food’s been a a real, you know, point of strength.

Unidentified speaker: You

Peter Galbo, Packaged Food Analyst, BofA: know, opportunities that you kind of see still in expanding wet cat outside of the dry cat food business and and just kind of how you can really tap into that further.

Mark Smucker, Chairman and CEO, J. M. Smucker Company: So first of all, in Meow Mix, the base brand is doing exceptionally well, and that’s also just the base portfolio as well as innovation. The Gravy Burst we launched was sort of a play on both wet and dry together. So that is that’s actually performing very well in market. We do play in the wet cat space. Obviously, we’re not the leader.

So we do think there is growth on wet cat and we will continue to drive that and continue to innovate as well in wet cat.

Peter Galbo, Packaged Food Analyst, BofA: And just a few more before we I want to make sure we have enough time for some questions. Tucker, at CAGNY, we kind of went back through the long term algorithm. Your free cash flow guidance, you’re still sticking to the reaching kind of a $1,000,000,000 free cash flow target. Just what kind of are the the puts and takes there, from a growth driver perspective, cost efficiency that’s gonna help you get there, and kind of how achievable is that goal just given all the uncertainty that we’ve we’re seeing in the market?

Tucker Marshall, CFO, J. M. Smucker Company: Yes. So we remain committed to delivering $1,000,000,000 or more in free cash flow, and that’s all in support of reinvesting in the business and also returning cash to shareholders. And when you think about the strength of our portfolio, what’s going to drive that and give confidence is just A, the base business growth or momentum. B, as you have the opportunity to sharpen the pencil within working capital, improve turns. And you also have the opportunity to see capital expenditures come down as we begin to get on the other side of expansive excuse me, capacity expansion for Uncrustables.

And so as we return back to that 3.5%, that will all support free cash flow generation. I think too our priority in the near term is to support the quarterly dividend, but also strengthen the balance sheet through debt pay down while maintaining our current investment grade debt rating. But then over time, as we get beyond FY 2027, where we realize that three times leverage or below, That also brings back the concept of share repurchases as well, which just inures to the balanced capital deployment model that we so desire to have.

Peter Galbo, Packaged Food Analyst, BofA: And as a reminder, Tucker, this year, you’re $800,000,000 of debt pay down and it’s another kind of $500,000,000 over the next couple of years? That’s correct. Great. And and Mark, just just last one. You know, one of the big questions we get about the Smucker’s portfolio, it’s it’s been this journey over the past five years, to kind of optimize.

And, you know, there’s been a you haven’t been shy about moving, whether that’s selling or or acquiring. Do you kind of feel like now you have the right pieces in in play, you’re fully kind of transformed in the in the model you want to be or, you know, do you see kind of further portfolio reshaping going forward?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: I’d answer that in two ways. I would say, first of all, we’re really happy with where our portfolio is right now. I mean, we’ve taken steps in each, if not all, but most of our core businesses in terms of getting that right. So really happy with the portfolio where it sits right now. Obviously, you’ve heard us talk about all the different things that we have in the hopper to continue to work on that, whether that’s innovation and really continue to be focused right now on driving organic growth.

That’s where we need, obviously, we’re fairly levered, which we’re going to, we’re working really hard to delever. So we’re really focused on the organic growth at the moment. So that’s the first part of the answer. The second part is we’re never done. And so to the extent that we can continue over time and potentially a bit farther in the future to continue to add to our portfolio where it makes sense, we would consider that.

But rest assured that for this moment in time, our focus remains on organic growth.

Peter Galbo, Packaged Food Analyst, BofA: Great. So we’ve got a little over five minutes for questions. So if anybody in the audience has any questions, please. There is a mic going around, and I think Brian’s gonna give us our first one.

Unidentified speaker: Alright. Thanks. Thanks. So I guess first question, two actually. One is just, Mark, there’s been a lot of press covering the change in government administrations and maybe what the attitudes may be relative to the food industry.

So I don’t know. Like, early thoughts in terms of what you’ve seen and heard and, you know, should we be worried about things like ingredient changes or changes to government feeding programs? Just where does it stand on the risk spectrum?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: It’s so the short answer is it’s early, right? So we don’t know a lot of there hasn’t been new regulations put out. We continue to engage with, you know, obviously, the administration and the various regulatory bodies in Washington. I spend a fair amount of time in Washington, and we have always had really good relationships with policymakers. So I think I’m actually hopeful and I’m cautiously optimistic that continuing to nurture those relationships will allow us to work with, the various bodies in Washington and come up with, I think there’s a willingness on both sides to listen and to try to work together to come up with, if there are changes, things that make sense for both the consumer and our industry.

So we have a long history of working with policymakers and regulators, and I feel that that constructive dialogue will continue. I

Unidentified speaker: feel like there’s opportunities for things to change, like you know, putting aside, you know, nothing is perfect. Right? So is this an opportunity to actually maybe change some things that, you know, you hadn’t really thought of now that we’re kind of opening the page?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: You know, one of the things that I that we will continue to advocate for is, if there are new rules or new regulations that we would really advocate for regulations at the federal level versus state by state, whether those are ingredients, labeling laws, whatever, anything like that. As you know, state often try to put out separate bills. So I think what we’re focused on as an industry and with the association, the Consumer Brand Association, is really trying to work at the federal level to get rules and regulations that apply across the country. And I think that creates a much more level playing field and keeps costs manageable.

Unidentified speaker: Thanks. That’s that’s helpful. And maybe just one last one. You know, that you think about the channels in The US that are performing outperforming other channels. Right?

So it’s larger you know, it’s Walmart, Costco, Kroger, you know, the shift is to maybe larger, more efficient retailers and away from maybe some of the less efficient retailers, especially efficient in terms of your ability to serve consumers.

Peter Galbo, Packaged Food Analyst, BofA: So to

Unidentified speaker: the extent that this changes that open up more opportunities, whether it’s in terms of working capital or cash flow or margins, if retailers more efficient, is that a kind of a different world for you?

Mark Smucker, Chairman and CEO, J. M. Smucker Company: I don’t know if you have anything. But, yes, we work really well with all of them. And we have really good relationships with our retail partners. I think you’ve seen, Amy, I think there was an article in The New York Times over the in The Sunday Times about one of the larger ones, which we all know who that is and their ability to strengthen an online business that is beneficial in terms of home delivery. I think there’s been, you know, retailers that have succeeded in that home delivery model, I think have really done very well.

And there’s actually a few of them that are doing that very well. Actually a few of them that are doing that very well. And then as, you know, we we wanna try to work fairly with each of them. And, obviously, we have an obligation to do that. But, where we can, punch above our weight in terms of the brands that we have and the relationships that we can build, I think that allows us to be a better competitor and ultimately win in an industry that is ultimately super competitive.

I think those relationships and really brand support and category expertise allow us to to strengthen our relationship with all retailers.

Tucker Marshall, CFO, J. M. Smucker Company: Brian, I would add to, you know, one of our objectives is every year is to to build share winning or gaining plans with each one of our retailers, right? And you’ve got to sort of skate to where the consumer is shopping. And that’s always been a key component of our strategy. And then when we do that, it enables us to have the right partnership with the retailer and to make sure that that we are managing both growth and cash flow for the company with said retailers. And that’s always been our strategy and will continue to be our strategy.

Peter Galbo, Packaged Food Analyst, BofA: Great. We probably have time for one more if there’s any other. Okay. We’ll leave it there. Mark, Tuckett, thank you guys for kicking off the conference.

Really appreciate it.

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