Earnings Call
General Mills Inc (GIS)
Earnings Call Transcript - GIS Q4 2021
Operator, Operator
Greetings, and welcome to the General Mills Fiscal 2021 Q4 Earnings Call. During the presentation, all participants will be in listen-only mode. Afterwards, we will have a question-and-answer session. As a reminder, this conference is being recorded on Wednesday, June 30, 2021. I would now like to turn the conference over to the VP of Investor Relations, Mr. Jeff Siemon. Please go ahead.
Jeff Siemon, VP of Investor Relations
Thank you, Frank, and good morning. Thanks, everyone, for joining us today for our Q&A session on fourth quarter results. I hope you had the 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 '22. 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. I'm here this morning with Jeff Harmening, our Chairman and CEO; Kofi Bruce, our CFO; and Jon Nudi, Group President of our North America Retail segment. Let's go ahead and get to the first question. Frank, can you get us started, please?
Operator, Operator
Our first question comes from Ken Goldman with JPMorgan.
Ken Goldman, Analyst
Two for me. The first is, can you give us a sense of what to expect for the cadence of the cost inflation this year? And then the second one is that the street, I think, is looking for maybe about 40 basis points in your gross margin in terms of the decline year-on-year in fiscal '22. I know you're not guiding to this, but given what you've said about inflation, HMM and pricing and nearly net pricing, is it kind of reasonable to expect something in this range? Or is that far off from what you're looking for?
Kofi Bruce, CFO
Ken, this is Kofi. Thank you for the question. As we evaluate the year, it's important to provide some perspective, particularly regarding margin trends. We anticipate that our second half will yield higher margins compared to the first half, especially facing pressure in Q1 due to a combination of inflation and delayed pricing benefits that will arise later in the quarter. The margin guidance reflects a balanced outlook for the entire year concerning inflation, with pricing gaining momentum as we move into Q2.
Ken Goldman, Analyst
And then just the second question. Is that 40 basis points for the year that the street is looking for, is that far out of line with what you're thinking, Kofi?
Kofi Bruce, CFO
Well, we're not going to give guidance at gross margin. But obviously, our guidance on profit, on operating profit and sales would indicate something in the range of a modest decline in operating profit margin.
Operator, Operator
Our next question comes from Andrew Lazar with Barclays.
Andrew Lazar, Analyst
Jeff, I noticed you referred to the situation as dynamic multiple times in your prepared remarks. While the consumer perspective may be becoming clearer, the cost and comparison aspects remain quite challenging. My question is, how much flexibility do you believe you have built into the FY '22 guidance considering the industry's difficulties, and also taking into account how the timing of pricing and other measures typically works to offset costs?
Jeff Harmening, CEO
Yes, Andrew, I think your observation is valid. We describe the situation as dynamic and uncertain, and I would also add that it is volatile. From a demand perspective, it remains volatile. Even though many consumers may be moving past COVID, the demand landscape is unstable, not just regarding at-home versus away-from-home consumption, but also concerning the effects of pricing and what that means for elasticity. Therefore, I would characterize the demand environment as still volatile, alongside the cost environment. This volatility affects input costs for manufacturing, transportation, and commodities. I am proud that over the past year, we have successfully navigated these challenges and delivered on our commitments. In fact, for the last three years, we have done what we said we would do. Now, we must confront this year, but I am confident about our guidance. I don’t believe it is overly cautious, nor do I think we are being overly ambitious. We are trying to convey our expectations clearly. Is it easy in this environment? No, but I feel positive about our capabilities and our execution at this time. We are clear about our path forward, and all these factors give me confidence that we can achieve our objectives. However, it is a challenging environment, and I expect it will continue to be.
Andrew Lazar, Analyst
And then there was a survey done recently that we read about one of the large CPG brokers, and it showed how, I guess, manufacturers were more optimistic about sort of sales trends in the back half of this calendar year compared to retailer expectations. And I didn't know if you've encountered sort of this divide in expectations in your discussions with your key customers. And if you have, maybe why you think this gap exists with respect to the differential again and expectations around maybe sales and/or stickiness between manufacturers and retailers?
Jeff Harmening, CEO
Yes, Andrew, I want to convey this properly, but as I mentioned earlier, it's a volatile situation. This discrepancy illustrates the uncertainty and volatility present in the market. First, looking at our guidance for the year, we anticipate a modest decline in sales of 1% to 3%. I want to emphasize that we are closely aligned with our retail partners, and we share a common understanding of the current environment. However, I can see why there are differing perspectives since the situation varies by category and geography. We are in sync with our customers regarding both demand and costs, as they are experiencing the same cost pressures we are. Consequently, we have implemented pricing adjustments in most of our categories across the globe. While nobody wants to raise prices, we've had to do so due to the current cost situation, and our customers have been understanding since they find themselves facing similar challenges.
Operator, Operator
Our next question comes from Robert Moskow with Credit Suisse.
Robert Moskow, Analyst
I was thinking about the terms that you're using, Jeff, to describe the environment as volatile. But I want to get a little tighter on it, because I would say that the cost environment is very volatile and maybe the pricing as well. But your opening comments would indicate that demand has been fortuitously strong; it has stayed strong. So are you saying demand is volatile, too? Or are you just saying it's uncertain? Because I would describe it as uncertain because you just don't know how people will react in the fall when maybe they go back to school and go back to offices.
Jeff Harmening, CEO
Yes, Rob, I appreciate the distinction. What we have observed recently is not very volatile; it has actually been quite steady. Honestly, it has unfolded as we anticipated. Our business was down last quarter compared to the same period last year when there was a stock-up, yet it remains significantly higher than pre-pandemic levels, along with our shares. We have stated for some time that while some believed demand would drop significantly when people returned to the office and normalcy, we believe some of these behaviors would stick, and that’s what we have seen. Recently, it hasn’t been volatile. The real question is what will occur for the rest of the year as pricing takes effect, as children return to school, and as we enter the fall. I anticipate it will be a volatile environment, and we are doing our best to project it based on our assumptions. But you are right; it hasn’t been volatile recently. Looking ahead three to six months, I think that will be the main challenge we face. I would also like to mention, during that timeframe, we still expect at-home food consumption to remain above pre-pandemic levels, even if it is slightly below last year.
Robert Moskow, Analyst
Right. Okay. And this question might be more in the weeds, but the strategy in grow, I guess, division or organization that you're creating internally, is that just combining some corporate functions together like corporate insights and M&A together? Or are you expanding the role and taking some of the responsibilities of the business units like revenue growth management maybe and pulling it into this division? Like how big of a change is this division you've developed?
Jeff Harmening, CEO
Yes, I would say it's a decent-sized change, but we are not removing operating responsibility from the businesses. Instead, we are reinforcing the operating responsibility for the near term and aligning it more closely with the businesses, which is crucial. We are centralizing certain capabilities because we don't want to conduct modeling in multiple locations; we want to do it in one central place. However, it's up to the businesses to utilize that modeling and make decisions that are best for them. We want to establish centralized capabilities to develop scale and expertise while ensuring that the businesses are the ones responsible for their P&L. Additionally, similar to how we evolved our strategic revenue management, we are enhancing our strategy function as well as M&A for the future. To achieve our sustainable top-line growth targets, we need to compete effectively and engage in more portfolio shaping. Therefore, we have an ongoing strategy group that differs from our previous approach.
Operator, Operator
Our next question comes from Laurent Grandet with Guggenheim.
Laurent Grandet, Analyst
And maybe if I can come back on one of those questions. So when you say at-home consumption will be more elevated in post-pandemic, I mean, I think that's probably what the assumption for everyone. Now by how much, it's really a question. So could you maybe help us understand your thinking process made by category, how you see those more elevated than consumption post-pandemic and what is triggering this in your view?
Jeff Harmening, CEO
Yes, Laurent, for this call, it may not be helpful to discuss each category individually. However, I can explain the reasoning behind our expectation for continued demand above pre-pandemic levels in our human food business, which I'll keep separate from pet food. Firstly, more people are likely to work from home frequently rather than commuting to the office daily, and we believe this trend is here to stay, establishing a new normal in work habits. Secondly, many millennials have developed stronger cooking and baking skills, gaining confidence in the kitchen, and realizing they can save money by preparing meals at home. While we don't suggest that people will stop dining out, there is a younger demographic that may not have engaged in cooking before, as indicated by our penetration data, particularly in the U.S., revealing a new group of consumers with increased demand. Thirdly, our e-commerce business has seen rapid growth, now accounting for 11% of our sales, up from 5% 18 months ago. Although the rate of growth may not be consistent moving forward, many have discovered that grocery shopping is now more convenient than before, making it likely that this trend will continue. For all these reasons, we believe that even as individuals dine out more and children return to school, there will still be sustained demand for at-home food consumption. Regarding the pet segment, the situation is more straightforward: there are simply more pets now than before. This trend is especially evident in the U.S., where 85% of newly adopted pets are in households that already have at least one pet. These are individuals accustomed to caring for pets, leading us to predict that pet food consumption will increase over the coming years. Additionally, the natural segment, where our Blue Buffalo brand operates, is the fastest-growing area within pet food. We expect the overall category to perform better than in recent years, with natural products continuing to lead in growth.
Laurent Grandet, Analyst
If I may, I got a second question. It's about plant-based dairy. We have seen, I mean, recently increased interest in plant-based dairy from consumers and actually also from investors as well. So could you please update us on what's the plan with your Yoplait brand in the U.S. and Canada as well as again that internationally and potentially maybe update us about your pet investment as well?
Jon Nudi, Group President of North America Retail
The yogurt category in the U.S. is really beginning to pick up speed. It was up 5% in April and May and up 2.5% in June. The main driver of this growth is the simply better health segment, which increased by 31%. This includes products like Ratio Keto and plant-based offerings. We are definitely seeing growth in that area. For Yoplait, we launched a plant-based product called Oui a few years ago that has been performing well, and we are also planning to introduce a new Yoplait plant-based product in the coming year. While this segment is still relatively small in the U.S. yogurt market, it is growing rapidly. The simply better health segment with dairy-based products such as Ratio Keto is a key focus for us, although plant-based is not the largest segment and likely won't be where the bulk of our growth comes from in the upcoming year.
Laurent Grandet, Analyst
And internationally for Häagen-Dazs, any plan there?
Jeff Harmening, CEO
When it comes to plant-based ice cream, I think it is a very, very small part of the category. What I will say is our Häagen-Dazs business has been growing very, very nicely and continues to do well all over the world, particularly strong growth in China and Europe this past year. And we've got some great innovation coming on Häagen-Dazs. And so plant-based is really small, but we are confident that we can continue to grow our Häagen-Dazs business really well in key geographies, looking for a summer where more consumers are out and about.
Operator, Operator
Our next question comes from Jason English with Goldman Sachs.
Jason English, Analyst
So now that you've announced price increases in the vast majority of categories and markets, can you give us some clarity on how much net price realization you expect to realize in your down 1 to 3 full-year organic sales outlook?
Kofi Bruce, CFO
Jason, this is Kofi. Appreciate the question. Let me give you a frame to think about this. So as we give guidance on inflation of about 7%, we would expect our holistic margin management to register about 4 percentage points of cost of goods sold. So that would offset a good portion of the inflation. And obviously, in this environment, we would need some additional price realization. While we're not quantifying it, we would expect the combination of levers through strategic revenue management, both list pricing, price pack optimization, and trade optimization, all of those things to yield us enough to cover our inflation expectations.
Jason English, Analyst
Okay. So take that remaining 3% of COGS and gross it up to revenue is probably a safe place to go right now? I think that's what you said. Switching gears but still remaining kind of on the topic of offsetting inflationary pressures. Your recent restructuring announcement, I thought you're going to have a lot more meat on the bone to give us today on this. But there's not a lot. Can you give us more clarity around the initiatives, including the expected cost savings? And how much do you expect to reinvest?
Kofi Bruce, CFO
Well, I will give you a frame to think about this. And let me sort of touch on what we're getting at. This is not simply a cost savings exercise, as Jeff kind of alluded to in some of his earlier answers. We are sort of aligning resources to growth-facing purposes. So there isn't here an expectation that we'll prioritize. Areas like digital and data and analytics, SRM, strategy and M&A, as Jeff mentioned earlier, those things are all critical to sort of maintaining the growth engine. Our expectation after this exercise is that our admin costs as a percent of net sales will be roughly in line with our fiscal '21. So they will keep pace with the sales decline.
Operator, Operator
Our next question comes from Bryan Spillane with Bank of America.
Bryan Spillane, Analyst
My question is about how we're considering inflation in our models. Kofi, could you provide some insights on which segments might experience more inflation than others? Also, how should we think about the potential volatility of inflation within those segments? Additionally, related to revenue management and dealing with inflation, is the impact more significant in some segments compared to others? I'm just looking to understand how we should view this across the different segments or if it is relatively consistent throughout.
Kofi Bruce, CFO
I appreciate the question. And while I don't want to get too specific at the segment level, what I will tell you is all of our segments are experiencing higher inflation, we are addressing in all of our segments with the mix of holistic margin management in line with our historical levels and SRM, I mean, using the entirety of the SRM toolkit in all five of the segments.
Bryan Spillane, Analyst
Okay. And then maybe just a follow-up. I know there's been a lot of talk about pricing, price increases as part of the way to combat inflation. We've heard that across our whole coverage universe. What do we expect on the backside of that, right? So as some of this inflation moderates, hopefully, would the expectation be that this pricing has stopped? Or would there be the potential that some of it would have to be dealt back as inflation moderates? Just trying to understand just how unusual this environment is, just how we should be thinking about the stickiness of those price increases if and when inflation rolls over?
Jeff Harmening, CEO
We typically do not provide forward-looking perspectives on pricing. While your question is valid, discussing future pricing is not something we intend to do extensively. However, I believe that one of the keys to our success, especially in recent times, has been our agility. We have demonstrated significant flexibility over the past year, including our ability to implement recent pricing changes quickly in the marketplace. This capability is due to our continuous approach. In a volatile market, it is not wise to seek certainty; instead, it is important to be thoughtful and swift. We aim to maintain both of these qualities. So, while we can't provide a direct answer about future pricing since we generally avoid that topic, I believe the main challenge in this unpredictable environment is to remain clear and agile, and we are committed to achieving that. We feel confident in our ability to manage this.
Operator, Operator
Our next question comes from David Palmer with Evercore ISI.
David Palmer, Analyst
Andrew mentioned that mega broker survey, and in that survey in the Q&A they cited there's consumer and category insights that the food companies have is a reason why the food companies were more bullish about demand than the retailer customers were. In other words, you had a better level of understanding about where things have been more sticky and for good reason. What is your latest thinking about categories and brands that you think most benefited in a semi-permanent way from COVID and perhaps because of consumers embracing new habits? And I have a quick follow-up.
Jon Nudi, Group President of North America Retail
David, it's Jon Nudi. As we look at our business, we think our Meals & Baking businesses particularly benefited during the pandemic, and it's all that in the sales numbers. As we really dig into our consumer insights, consumers changed their habits. Obviously, baked a lot more. We believe that some of it will be sticky. It's more than just food. It's really bringing joy to the family and bringing the family together, which is terrific. And then Jeff mentioned a lot is learning to cook, and that's something that's going to stick as well. So all of our research would say, certainly, we're not going to stay at the elevated levels that we've seen in the pandemic. But consumers will eat at home more than prior to the pandemic, and they'll use these new skills to use our products more than prior to the pandemic as well. So we're spending a lot of time. We've got a lot of new insights, really digital insights, really leveraging the first-party data that we have with Box Tops for Education, Pillsbury.com, BettyCrocker.com, that's really giving us some rich views into the consumer's day in their journey. And we think, again, via that data, there's going to be something that sticks in the future.
David Palmer, Analyst
One category that I'm really confused by is cereal. It's an at-home category, but it's perhaps part that lives in that world of convenience that compressed morning daypart. In other words, cereal has really lost a lot of share of at-home breakfast during COVID, if that's a way to think about it. At-home breakfast getting the benefit of people being at home. But cereal not as being as much part of that. In other words, cereal is up 1% over the last two years, not really that impressive. How are you thinking about cereal going forward? Do you think it actually has a bit of a re-brand as people get back to convenience? Or is this sort of just the new normal, more of the existing normal? One of the few categories that really didn't get affected by COVID at all and it's just sort of low growth? Any thoughts there?
Jeff Harmening, CEO
Yes. Absolutely, David. For sure, I think as consumers who are at home have more time to prepare breakfast, we saw things like eggs and pancakes grow more quickly than cereal. We do believe cereal will continue growing in the future. And again, as we look over that two-year period, the category did grow. We grew even more aggressively than that. So again, we increased 60 basis points of share in fiscal '21; that's 31 consecutive months of share growth, 10 consecutive quarters, 4 consecutive years. And we believe that cereal is important today; it will be important in the future. It's used, obviously, for breakfast. It's used for snacking throughout the day. We've got some great innovation coming this coming year. And at the same time, we know that our marketing continues to work, things like cereals and our cholesterol messaging, our kid fun messaging around Cinnamon Toast Crunch and Lucky Charms. We believe the category will continue to grow. We hope, again, it's probably not going to be high single-digits, but we think a little bit of growth in that category is in our future. And I think as things come back to normal, to your point, to more normal, and consumers are back to school and back to the office, we'll see some of the convenience cereal provides providing a bit of a tail into the category.
Operator, Operator
Our next question comes from Faiza Alwy with Deutsche Bank.
Faiza Alwy, Analyst
I wanted to ask about your investments. I know you've increased media spending and also invested in critical capabilities. I'm curious about your investment outlook for fiscal '22. Are you expecting media spending to continue growing at the double-digit CAGR we've seen over the last two years, or should we maintain the current level? Additionally, how much more investment in capabilities do you anticipate needing going forward?
Jeff Harmening, CEO
Let me address that. Kofi, feel free to add any background as well. We won't provide specific guidance on our media spending for next year. As we mentioned during the CAGNY Q4, we expect our media spending to grow in line with sales over time. We'll see how this upcoming year unfolds, but that has been our commitment. Regarding investments, we are very satisfied with the progress we've made in our data and analytics capabilities. Jon Nudi previously discussed Box Tops; we have digitized that initiative. In our opening remarks, we highlighted our ongoing projects in the patio segment, and you'll hear a lot more about that this year. We have successfully integrated an omnichannel strategy in China with our retail operations, which is providing valuable insights and positive results. We are encouraged by what we are observing. On the cost front, our global sourcing efforts now incorporate data and analytics, enhancing our approach to costing and HMM. We plan to keep investing in our data and analytics capabilities because we are pleased with the outcomes thus far. Some of these investments will focus on foundational aspects, while others will target analytics for driving growth as well as cost-saving initiatives. This represents a significant area for future investment alongside our strategy and M&A efforts as we work to advance our Accelerate strategy.
Faiza Alwy, Analyst
Okay. Great. I have a second question regarding Blue Buffalo and the Pet segment in general. I know you mentioned growth in that segment. I'm interested in knowing if there are any specific plans beyond the connected commerce initiatives you discussed. Will there be any innovations we should be aware of? Also, at CAGNY, you mentioned the possibility of expanding Blue Buffalo into international markets, so I'm curious if there are any plans to pursue that this year.
Jeff Harmening, CEO
So first of all, we're really pleased with our Blue Buffalo performance, including the fourth quarter where our retail sales grew in the mid double-digits. And so even if it doesn't look like that on the P&L, you have to remember we're lapping 4 months from last year and the stock-up from the year before. And so we're really pleased with Blue Buffalo. We see strong growth ahead. That would be my opening comment. In terms of how we're going to grow, this digital capability will certainly be a big piece of that, but so with innovation. What we really like what we've seen on the Tasteful launch, and we're literally selling everything we can make from this new Tastefuls cat line and we’re under-indexed in cat, the margins in that segment are good, and we're highly confident Blue Buffalo can play a role in that. We've recently launched some innovations in the snacking and the bones launch, and we're excited about what that can be, in addition then to clearly bringing online this Tyson acquisition, which we hope to close shortly. And so we're going to grow Blue Buffalo organically, continue to do that. We're bullish about our opportunity to do that as well as effectively bring on this new part of the portfolio, this Tyson treat business where we’re under-index, and Tyson has done a nice job with that business. But we think combining what we can do with our capabilities in pet with the business they already have, we think there's good growth in that as well.
Operator, Operator
Our next question comes from Michael Lavery with Piper Sandler.
Michael Lavery, Analyst
I know you've called out the uncertainty, and I think that's all very clear. But can you give a sense around elasticity, what kind of assumptions you're making for your planning process?
Kofi Bruce, CFO
Sure. As we developed our plans this year, one advantage of our SRM capability is that we have comprehensive demand elasticity models. Given the uncertainties in the current environment and the widespread inflation affecting various industries globally, these factors create conditions where our pricing elasticity models might anticipate a different response to pricing changes than usual. It's important to mention that this uncertainty is a significant consideration when discussing demand elasticity.
Michael Lavery, Analyst
And so does that net you out at greater elasticity than historical levels? Or do you expect it to be pretty consistent with what you've seen before? What's that kind of net out to?
Kofi Bruce, CFO
Yes. Well, our models are built on sort of historical expectations. I think what I'm also giving acknowledgment to is that the environment itself is reason for us to be cautious about being certain on the call. There will be demand elasticity. There's certainly an environment where I think demand elasticity models could be launched just because of the breadth of inflation in the market.
Operator, Operator
Our next question comes from the C-store and Foodservice segment. You've called out how you expect the lift to volumes or sales from more demand or reopening. But can you touch on the impact for pricing and specifically pass-through pricing. How much of a factor do you expect that to be for the sales lift? And should we look at modeling an acceleration there specifically on the pricing side because of this pass-through costs?
Jeff Harmening, CEO
So Michael, I would say that our increasing costs are widespread. They span across different regions, product segments, and sales channels, including our Convenience and Foodservice segment. Consequently, we expect to adjust our pricing in this area due to the rising costs. This inflationary pressure is prevalent throughout the market and is affecting C&F as well. We have already raised prices in the Foodservice segment in response to our increased costs. However, I want to emphasize our confidence in the convenience and foodservice business to achieve growth this year as schools reopen and more people venture out. We are well positioned to capitalize on the growth opportunities in that market.
Operator, Operator
Our next question comes from Chris Growe with Stifel.
Chris Growe, Analyst
I just had a couple of questions for you. When you gave your guidance for the year, like your constant currency EPS growth, I am just curious; it does not incorporate the acquisitions or divestitures. And I don't know if you have any kind of quick words on those. We've modeled, have estimated kind of 1% to 2% dilution for the yogurt business and then slight accretion for the pet treats business. Would that be in the realm of expectations? If you have any thoughts on that?
Kofi Bruce, CFO
So Chris, this is Kofi. So we don't have new information that would change the perspective we've already given. Obviously, we do expect the pet treats business to close shortly. And obviously, until that point, we can't get too much more specific, but it is probably important to give some parameters around what slightly accretive means. I think it's important to note, we will see a portion of earnings contributions for the year. We will also see some of the purchase accounting related amortization, including inventory step-up. And those factors will lead us to expectations probably in the range of $0.01 to $0.02 accretive for the year on the pet treats business.
Chris Growe, Analyst
Any comments on your expectations for yogurt when that closes, correct?
Kofi Bruce, CFO
No. And that sets further out, and we'll give more color as we get closer.
Chris Growe, Analyst
Okay. I had just one other question, if I could, on the international segments. Asia, Latin America hit about a 5% operating margin for the year. Europe, Australia, about 7.5%. Are these sustainable margins? Could they grow from here? There's obviously some pretty significant moves as we move through the year in terms of improvements in profitability. I just want to get a sense of how much of that was the benefit of COVID in some cases and the pandemic? And how much of it is potential to kind of stick, if you will, based on changes you're making in those businesses?
Kofi Bruce, CFO
Chris, that's a great question. I think we've been very pleased with the progress we've made in margins on both of those businesses in this environment. Obviously, some of that is related to the leverage benefits of operating in elevated demand. But we've also been making and continue to make business model changes in both businesses that are driving margin improvements. And actually, we'll continue to make them, even contemplated as part of the restructuring actions that we've already announced. So I would expect that we would hold on to the portion of these margin gains and continue to drive margin improvement and get to a much more competitive place on both of these businesses.
Jeff Siemon, VP of Investor Relations
I think we have time for one more question, Frank.
Operator, Operator
Our next question comes from Ken Zaslow with Bank of Montreal.
Ken Zaslow, Analyst
I have two questions. One is, you guys have been really early on the data analytics side. What are the specific new capabilities that you need? I mean just a little surprised that you're not there, I guess, is kind of what I think. You guys were very, very early on that. So what is the new learnings that you are looking to explore and do more with? And what will be the returns on that? And then I have a second question.
Jeff Harmening, CEO
We have been focused on enhancing our data and analytics capabilities for the past couple of years. The initial step involved creating a solid foundation, which I won't delve into right now. We are currently building upon that foundation with targeted growth initiatives such as strategic revenue management, engaging consumers through programs like Box Tops for Education, and advancing our efforts in pet personalization and omnichannel strategies in China. Additionally, we are optimizing costs through procurement, but there are numerous opportunities to further leverage data and analytics to enhance our business. We will keep investing to develop those areas. While it may appear extensive, establishing the foundation first was essential, and we are now progressing with specific capabilities.
Ken Zaslow, Analyst
Great. My second question is, you put out the 3-year growth that you had, 2% sales, 2% operating income, and 5% EPS. When you think about the next 3 years beyond that, does that seem like the right mix? Or do you think the changes that you're having should accelerate that by a certain amount of basis points? And how do you think about the next 3 years? And again, not next year, but just thinking about it in the 3-year clip. I think that's a good way of thinking about it and how you're positioning it. So I was just curious to see how you think about relative to the last 3 years? And I'll leave it there, and I appreciate it.
Jeff Harmening, CEO
Again, I'm going to try to take you through this year. I respect the question. Looking ahead, our goal is to return to sustainable growth of 2% to 3%. This requires us to do two things. First, we need to compete effectively, and we have significantly improved our competitive position globally over the past couple of years. We must continue this effort to achieve the 2% to 3% growth. Additionally, we will need to reshape our portfolio, as seen with the planned divestiture of Yoplait in Europe and the upcoming acquisition of Pluto. Our strategy will focus on reshaping the portfolio while competing effectively to reach that growth rate. This will be our plan moving forward, with dedicated teams focused on delivering what we have committed for the next 12 months.
Ken Zaslow, Analyst
Great. And do you think that all these things that you're putting in place seem like it should fuel this growth? But I appreciate the answer, and I look forward to seeing what you guys can do.
Jeff Siemon, VP of Investor Relations
Okay. I think that gets to the end of our time this morning. So thank you, everyone, for your time and attention and appreciate the good questions. Please reach out over the course of the day if you have any follow-ups. And we look forward to talking to you again soon. Bye, bye.
Operator, Operator
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.