Thank you, Silvana, and good morning everyone. Thank you for joining us today for our Q&A session on second quarter results. I hope everyone had time to review our press release, listen to our prepared remarks, and view our presentation materials, which were made available this morning on our Investor Relations website. It's important to note that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions, including facts and assumptions related to the potential impact of the COVID-19 pandemic on our results in fiscal 2022. Please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which may be discussed on today's call. We're here with Jeff Harmening, our Chairman and CEO; Kofi Bruce, our CFO; and Jon Nudi, Group President of our North America Retail segment. So, let's go ahead and get to the first question. Silvana, can you please get us started?

Close enough. Good morning everybody. You highlighted that your actions offset supply disruptions and logistics issues that are starting to bear fruit. Great to hear, obviously, but we've sort of been seeing a similar pattern from the whole sector for a while now, like what is, I guess, 'hidden costs arising', management team think the worst is over, and then the next quarter unfortunately the pattern repeats. So, I guess my question is, in the wake of these exogenous issues continuing to crop up, does this guidance have any sort of bigger cushion in it, bigger than usual to kind of account for the potential that some of these logistics and supply shortages worsen once again in the back half of the year?

Sure, Ken. This is Kofi. I appreciate the question. As you can see, we provided a wider range for operating profit guidance compared to our forecasts for revenue and EPS, which reflects the underlying volatility in this environment. We are experiencing about an eight to tenfold increase in supply chain disruptions. The predictability of these issues has influenced our quarter, but our expectations for the second half do not indicate significant improvement. Compared to last year, we noticed an increase in external supply chain costs in the latter half of the year, and we do not anticipate a major change in the costs associated with disruptions for the remainder of the year. The lighter guidance takes this volatility into account.

Okay. Thank you for that. And then quick follow-up. On your cereal business, obviously, you've taken a great deal of share from your larger competitor that's having some unfortunate issues of its own right now. Can you just walk us through a little bit where your plants are in terms of utilization in case that the demand for your products continues to grow over the next few months?

Hi Ken, it's Jon Nudi. I will tell you we feel really good about our cereal business and certainly there has been some short-term dislocation from our major competitors. Our performance, which will come in a longer time, in fact, over the last four years we had really strong performance. As we look at the short term, we feel we have the capacity, and we need to continue that, invest in our brands and continue to innovate and again we expect to grow share and in the category growth as well. So, short-term, we feel good about our cereal business and we continue to do what we've done over the last four years, that's continue in the category.

Good morning. Happy Holidays everybody. Jeff, I'm curious how General Mills thinks about sort of the balance between, let's say shorter term profitability given the dramatically higher cost to serve currently vs. the potential for longer term benefits from sort of stepping up and servicing the customer and consumer in this difficult environment. So, I guess what gives you the confidence that fulfilling this excess demand at this higher cost is sort of worthwhile, and like where is the cutoff and where you would decide to forgo a sale, not suggesting we're kind of at that point yet?

Yes, Andrew. I mean one of the main reasons we spent quite a bit of time looking at the trade-offs between things like customer service and margin and sales growth and that sort of thing. And we always try to make sure we play the long game regarding these things. We've been around for 155 years because we play the long game. What I would say, in this environment there is a huge trade-off, but I'm not sure there is a trade-off between higher service level cost. What we would find is that we create more deleverage and incur fines because we would be more inefficient and get fined for our retail customers because the more efficient and then we'd be shipping truckloads of stuff that we're probably most efficient, and so there really isn't a cost trade-off. So, we would not be making more money if we looked less at our service. We feel it's our responsibility at the end of the day to the end consumer and making sure they have the products they want. By fulfilling that, we’re doing our job. The only thing we would gain by lessening service is margins look at the moment better, but our sales would be down, but we wouldn't make any more money for General Mills' shareholders; we certainly are not going to generate more cash than we’re generating now either.

Got it. Thanks, Kofi. I have a quick follow-up. In your outlook, you mentioned that General Mills anticipates EPS growth in the latter half of the year to be more focused in fiscal Q4. Does that imply you expect some modest EPS growth in Q3, with significantly more in Q4, or am I misunderstanding? Thank you.

I appreciate the question. What it really reflects is our expectation that we will see an improvement off of the margin decline that we just posted in Q2 and sequential improvement on that as we work around it from Q3 to Q4.

Thank you. Good morning everyone and Happy Holidays. I guess the question, Kofi, is if you can just give us some context on the inflation delta in terms of the guidance? Where were things worse than you expected? And then the other question I had just around price elasticity. I mean we've heard a lot of companies talking about things being better than expected, but it just seems like the retailers aren't passing all the pricing on. So, I wanted to get your thoughts around that as we kind of go forward over the next few months and quarters.

Sure. Let me start with your first question. About 55% of our input costs are related to raw packaging materials, 30% to manufacturing, and the rest to logistics. We observed a notable increase in our raw and packaging material costs, which have now moved into double digits. Logistics, which was already in double digits, continues to feel the effects of that base loss, while manufacturing remains in the low single digits. Specifically, when we look at sourcing and packaging, we see price pressure in aluminum, resin, fiber, raw materials, green fats, and oils, as well as in logistical structures.

Sure, it's Jon. One of the things we are really pleased with is our strong capabilities that we've built over the last five to six years and got a lot more data and analytics to leverage. So, we've been closely monitoring, obviously, the pricing that we've taken, reflecting that we see in the market, and that's really meeting our expectations at this point. We have seen elasticity something better than what we would have modeled historically to date. As we move to the back half, we expect to see a bit more elasticity and we'll continue to monitor that. With our capabilities there, we'll literally be looking at pricing from a daily basis and continue to moderate and adjust.

Hi, thanks. Hope everyone's well. I wanted to know in your raising your prices, Jon, and you're showing customers your inflation and your ingredients like 8% to 9%, do you also show them the supply chain disruption costs that you're incurring? And is it possible to justify the pricing based on this? Because a customer could argue that maybe some of that's transitory. So, I want to know how that conversation goes?

So, I've been here for a long time and I continue to make conversations that are no easier than they have been in the past. I think everyone recognizes inflation and our job is to build justifications, so we spend a lot of time building the case. Most of that case has been built around inflation and the market basket. So, I think with that we will stick over a longer period of time. Certainly, retailers are very aware in the short-term supply chain costs that we're incurring and they are incurring the same costs, but at this point, really don’t understand the conversations. Again, really focusing on some of the more macro factors and inflation to justify the pricing.

Yes, so that's kind of my question, Jon. So, is it more difficult than to factor in supply chain disruption as justification? So, like the pricing that you're taking, is that designed to offset 8% to 9% inflation longer term or is it also designed to offset some of this disruption as well?

Yes, so if you look at our pricing as well, we would offset the inflation; it's really the short-term supply chain costs, obviously that are really the bogey for us. That is our composition of the retailers. And again, we want to make sure that we price in a way that is right for our consumers as well, so we're balancing how much pricing we could take and how much is wanted, and then really leveraging the strong capabilities that we've built off. So, we're trying to take a long view from a pricing standpoint, and clearly, there are some short-term trends that are challenging with supply chain investments.

But Robert, I think you bring up a good point, Jon answered it well. But some of these supply chain disruptions, they will be transitory and we would expect them to improve for the rest of our fiscal year, as noted by Kofi earlier. But over the longer term, I mean, the supply chain will get more efficient. We had terrific productivity capabilities, and so we are highly confident that these costs over time are costs that the business will not bear. So, even if it’s in a conversation we have with retailers now, we are confident that over time once the market stabilizes, these are costs that we can recoup in our P&L.

This is Jeff Siemon. I have one more point to add too, maybe hit the nail on the head. While we don't expect this disruption environment necessarily to improve meaningfully in the back half, as Kofi said, we do expect our margin performance year-over-year to improve, which is really all about the comparisons that get quite a bit easier as we have more supply chain costs in the back half of last year. So, the cost that we're seeing this year on a year-over-year basis will be less of a headwind, which really drives gross and operating margin improvement in the back half.

Good morning everyone, and Happy Holidays. Jeff Siemon, you addressed one of my questions with Kofi, but I’d like to ask a more specific question. Year-on-year, the pressure on gross margins is expected to lessen due to the easier comparisons. However, prices are still increasing for the remainder of the year, along with inflation. Looking at the second quarter, your gross margins declined. Is this the lowest we can expect based on current information? Should we anticipate sequential growth in gross margins?

I think what you can expect is we will see improvement off of the decline and sequential improvement as we move through from Q3 to Q4. And that's about as far as we've implied in the guidance we've given.

Okay, so implicitly that 3Q margins could be weaker than 2Q. Next question. The U.S. consumer is still obviously very flush with cash. But one of your competitors has already noted that trade down began to resume in categories like cereal. Are you seeing something similar across any of your categories? And what are you planning for in regards to trade down behavior, price elasticity, etc., as we begin to cycle a pretty big stimulus early next year?

This is Jon. We have seen the dynamics play out. When we look at our business, most of our categories in our business are strengthening. As we look at share versus private label, private label lost share in the pandemic, we continue to gain share, and we're continuing to monitor that. We believe that building our brands and innovating and doing what we know best are driving our business. And if you look back historically during the times of recession, again our brands performed well. So, at this point, we haven't seen any change in dynamics.

And I would add on that, Jason. We haven't seen it in food service either. We haven't seen it in pet. We haven't seen it in Europe. We haven't seen it in China or Brazil. So, we simply haven't seen that behavior.

Yes, hey, thanks and good morning from me as well. On the supply chain disruptions that you're seeing in labor shortages, etc., taking all your prior comments in context, are there any areas where you are a little bit more optimistic, such as categories of bottlenecks or geographic overlays? Is there a cadence that you're expecting?

Yes, hey Steve, it's Jon. One of the challenges right now is the disruptions are really across the entire supply chain. In some cases, it's material disruptions that are impacting the category; in other cases, where capacity is constrained, which is an extreme challenge for all of our businesses. I think in one area that we do believe will get better as we move to the back half is material disruptions and that is due to the actions we're taking. We're bringing on alternate suppliers where in the past we were single-sourced on particular ingredients, and our sourcing team has been doing a great job finding submissions. We will see some of this come online for some key ingredients that were hard for us through Q2, and I think that's the one area that we do expect to get a bit better. We do expect our service levels to remain challenged in the back half of the year, with the Q3 looking a lot like Q2, but Q4 will get better.

Okay, great. Just to clarify that. So, you’re expecting that relief to come in the ingredient sourcing, but more because you're diversifying and less because the conditions get better, is that fair?

That's fair and today we've not seen a huge improvement in availability across materials. Every time we see something get better, something else goes the other way around. So, it continues to be challenging.

Okay, great. And then the other question I had was just on Europe and Australia where the margin pressure is obviously exceptionally acute. Just as you go into annual price negotiations there, based on what you're talking about so far, just your relative confidence that that will be a source of relief in the fourth quarter as those negotiations take effect?

I think you've outlined the constraints on pricing in that environment. There is a pretty firm negotiation window for pricing. I can't comment on anything forward-looking, obviously, but what I will confirm is that that's why you've seen our margins in Europe under a little bit more pressure than the rest of the segments, and in particular, as you look at pricing as a contribution to sales growth, you will see that reflected there. So, we'll leave it there, and I just add, it's also a small business, so it's 5% to 10% of our total sales.

Hi, good morning. My first question has to do with just the magnitude of the pricing that we should expect to see on the shelf. I think the last few months, you said it was a 9% average increase at retail in North America. Can you give us a sense for how high you think that might be, maybe over the next six months?

Yes, I think we generally don't comment on forward-looking pricing. Just know that we have pricing already in the marketplace that we've announced to our customers, so we're confident that it will be higher in the second half of the year, but overall we don't comment on the specifics of forward-looking pricing.

Okay, fair enough. But I guess my question is with regard to the competitive activity. I know you said private label really isn't a threat, and they're not gaining shares, but sort of over a longer-term basis, your share trends have been neutral, but I assume at some point competition is going to sort of fight back harder. Can you talk about what you're seeing from some of the other branded guys in North America in your other categories? Are they being equally aggressive on pricing? Do you expect them to step up promotions in an effort to gain share? Just maybe what you're seeing in stores right now?

I think it's probably best to let our competitors talk about what their pricing is going to be and what their outlook for the business is. One of the things that I'm most proud of, Wendy, that you did note, and I'm glad you noted, is that we've gained share over a long period of time, and we've been doing it in North America Retail, we’ve been doing it in our pet business. We've been doing it in Europe and China and Brazil. One of the things I'm most proud of, even in this tough environment, is that we continue to keep that performance. That’s a sign of the quality of our execution and our customer service levels. A lot of the time, our competitors were not constrained by supply and did not have material disruption. Those things come and go, and we take them as they come. But I am most pleased about our performance. We've been able to do all that while reshaping our portfolio and adding pet brands that have worked really well and divesting our yogurt business in Europe while now announcing a dough business, and we restructured our organization.

And just in terms of the North America business, I assume one of the big contributing factors to your market share gains has been the innovation we've seen, which has been terrific, seemingly across the portfolio in North America Retail. But I assume innovation kind of comes in ways; some quarters are stronger than others. And I'm not looking for specifics or things you haven't announced yet, but just generally can you comment on the innovation pipeline for calendar 2022? Do you think it will be as strong as the last six to twelve months? Is innovation still set to be a strong driver of hopefully more market share gains?

Yes, sure. Hi Wendy. As Jeff noted, we've been performing well over a long period, and the point is really about focusing on the fundamentals, one of those fundamentals is innovation. Thus, brand building and innovation are key to our brands over time. One of the things we did during the pandemic was pull back on innovation, but we kept innovating, and our customers appreciated that. We kept the pedal down. So as we move into calendar year 2022, we’d expect to see similar levels of innovation versus what we saw in the last year. In some cases, we have better ideas and we are quite excited about it. Whether there is inflation or not, the fundamental is less about building our brands and innovating, and we'll continue to do that moving forward.

Good morning. Happy Holidays. During the quarter, in North America, you mentioned that your shipments lagged consumption by about 2% because of the service challenges you experienced. Can you just elaborate on what some of the dynamics were that contributed to that? Would you expect this to continue into the back half of the year? And I guess as a follow-up, are inventory levels adequate to meet elevated demand into the back half?

Yes, hi Pam. Clearly, as we talked about, there are lots of challenges in supply chain, and those have impacted our ability to service our customers or service levels. During the quarter, we were low to mid-teens versus high nineties targets. As a result, we couldn't ship to all the demand we saw, and retailers drew down a bit of inventory in the quarter, and that was the gap you talked about. As we look to the back half, we do expect our service levels to be similar to the front half. We wouldn't expect to close that gap as we move through the back half of our fiscal year. Our goal is to continue to strengthen our supply chain as we get into fiscal 2023 and beyond. We believe that we'll be in better shape and be able to service all above that. One of the things we've pivoted to is shelf availability; we think that's really important. While it's certainly not where we want it to be, it's better than our competition. Our share of sales in Q2 now being on the shelf is lower than our competition, and that's a testament to our supply chain and the great job we are doing and the communication we have with the customers.

Great. Thanks. Can you talk about what short-term initiatives you have on the operational side to manage the disruption you're experiencing in the supply chain? And also, are there any changes that you're making to operations or increasing investments and capabilities or automation in response to the current operating environment?

Yes, for sure. We look back to many of the practices that we put in place at the beginning of the pandemic. One of the things is our daily meetings on supply chain history for North America retail. I share a weekly supply chain huddle with all of our senior leaders across the business to talk about these issues and help our team work through some of the challenges. We're leveraging data analytics; one of the things we've been doing for a long time is really increasing our investments and our capabilities there, and that's starting to bear some fruit. If you think about the number of trucks we have running across North America, we can show that they are more full than they currently are. That's good for us, good for our business, and good for our margins. We're seeing leverage in that technology. We have other initiatives from a data and analytics standpoint, and we’re also looking at our distribution centers. There are some opportunities in our facilities where we're challenged from a labor standpoint. So, we have a host of things happening. Our communication is probably the most important trend—communication with our vendors to ensure delivery of ingredients to maintain pricing, and we spend a lot of time meeting with our customers to ensure we provide the best service to the consumers.

Thanks. Good morning. Happy Holidays. Just looking back at your presentation slide number 32, which is that gross margin waterfall chart. Thanks for that. There are no numbers on those steps in the chart, but it looks like the supply chain disruptions, deleverage, and other factors are a large part of, or the majority of the decline, if you net out everything else—in other words, about 300 basis points. Maybe you can confirm if that's at least ballpark correct? But also, obviously, these effects are not new to the quarter. I mean, how would you think about that same line item for supply chain disruptions and deleverage and other factors throughout the year and what's implied in the guidance for the second half?

Yes, so let me add. Thank you for the question, David. Let me start with Q2 and then I'll talk about what to expect going forward. I think your read is about exactly right; it’s about 300 basis points or so related to the combination of those disruption factors and the price mix in the quarter offsetting the impact of the inflation. But going forward, what you can expect as we move into the back half is a step-up starting in Q3 in the contribution from price/mix. I would expect inflation to be roughly equal front half and back half; this is pretty evenly spread across the quarters, and so nothing material there. There will be easing in the drag of the headwind from those supply chain disruption costs—not because they will ease, but because when you think about the comparison to last year, we saw a ramp-up in external supply chain costs. So, we don't expect these costs to ease; we expect them to reflect the costs we saw last year. That's effectively how to think about the back half of the year and what drives the margin improvement as we step from Q3 to Q4.

Great, that's helpful. Thank you. And then you mentioned in one of your remarks that you thought the price elasticity would perhaps get a little less favorable later in the year. What is your thinking there? I think it was Jon that made that comment. How much—this is something we've been thinking about a lot. Is it the lapping of stimulus for greater availability of private label or value brands that have perhaps been more supply chain constrained? What’re your thoughts on price elasticities as you get further into calendar 2022?

Yes. Let me start first. I think I might have just spoken. I said inflation will balance; inflation actually stems out in the back half. But to your question on elasticity, we are assuming a moderate increase in price elasticity, although still below our historical levels in the back half. So, that’s what is contained in our sales and profit guidance.

David, I think we're just trying to be pragmatic, right? So, all the things you mentioned are real—somewhat snap benefits are decreasing a bit, although still elevated since 2019 levels. So, from a planning standpoint, we're just trying to be pragmatic and assess elasticity.

Hi, good morning.

Good morning.

I'll add my Happy Holidays as well. I had just two questions. The first one will just be in relation to this incremental $500 million in inflation from your initial expectations. I'm just curious if you could frame how much of that is cost inflation and how much of that is the pricing disruptions? I think you said that's incorporated into that figure. Just to get a sense of like what's ongoing, what will stall for, and what hopefully will be transitory?

It's a great question, Chris. Let me take a crack at it. So, as you think about the $0.5 billion of increased cost that came in since the start of the year – of that, a little less than half of that is sitting in inflation, which we're now estimating to be 8% to 9% for the full year. That implies, obviously, double digits in the back half. The other half is really relating to those factors and the disruption in the supply chain, most of which is driven by direct costs—things that Jon alluded to, inefficiency in trading, and all the things that we're doing in this environment to ensure key customer service levels.

Okay, thank you for that color there. And then just a follow-up question. I think a bit to Dave's question, but this quarter had a stronger pricing performance than I expected, but the gross margin was weaker. I'm just trying to understand the incremental inflation you’re feeling and whether more of that came through in the second quarter, causing that weaker gross margin. I'm trying to flip that with your comments about second half inflations that we have versus first half. So, but in the quarter was that a heavier drive on the gross margin?

The drag came from a combination of inflation and really we saw a step-up in the cost of disruption in Q2 as we moved from Q1 to Q2. So that was actually a bit more of the driver as we look at the quarter. And then I think as we go forward, as I alluded to, we expect our price/mix contribution from actions that we've already announced and negotiated with customers to start probably mid-quarter and then ramp fully in to Q4.

Thank you. Good morning.

Good morning Michael.

You've obviously talked a lot about the disruptions in the various stages of supply chain. Can you just give us a sense in your guidance what you're assuming relative to a vaccine mandate and what that might do at impact the labor market or testing costs or both?

We actually don't have a specific provision for a vaccine mandate. Obviously, it's still working its way through course, but we aren't expecting it to have a material impact on our guidance beyond what we already painted.

So if it did happen, the additional cost would be quite small or just reflect what you already accounted for?

Yes, I think it's far more of the second, Michael. It gives us coverage.

Yes, hi Michael. Our snacks business is significantly outperforming; it had been for a while one of the laggards. Can you just maybe give a sense of what's really given that a boost? Is it related to a better ability to supply product or is it more innovation than some other factors? So, we see the grain category and the bar category really accelerate during the lockdown, and people are getting back to being more mobile. Our business is actually up 16% in Q2. Just not quite as much versus the overall categories. And we’ll continue to stay focused on building the brands; we're still the number one brand in the category, and innovation is a key driver. We’re seeing a lot of movement in the kids segments, so that's probably one area that we're queuing up. We’re doing well with competing products, and we just focus on innovation and brand building. There are new snack products in the category we really like, and many categories for us over the last four to five years have been facing challenges keeping up from a capacity standpoint. We continue to be challenged from that perspective but should see improvements in the back half also driving double-digit growth in a very exciting way.

Okay, great. Thanks so much.

Thanks, Michael.

Okay, I think that's all the time we have this morning. Appreciate everyone's interest and good questions and discussion. Thanks for sticking with us during the holiday week. We wish everybody a restful holiday season, and we look forward to catching up in the New Year. Thanks so much.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.