David Palmer: Thanks. Congrats on the sale. Casey, I’d love to get your thoughts about how your strategic vision on Green Giant has maybe changed over time. It sounds like you’re thinking frozen is a bigger part of your future than maybe you might have been thinking in the past and that’s leading to this more selective sale. So, any thoughts about your future with the category and maybe how you might have warmed up to the Green Giant frozen side? And I thought it was an interesting point made before about the maybe perhaps the smoothing out on inventory or effects to your free cash flow from this part of the Green Giant being sold. Can you maybe give us a sense about how much your free cash flow might be smoothed out versus what it was prior? Thanks so much.
Casey Keller: On that last question, we should see a significant impact from smoothing our cash flows without having to finance the inventory. As Bruce said, it’s gone up and down with how much we’ve bought each year and sometimes we end up buying a lot, sometimes we end up buying a little, but this will make our inventory profile be a lot smoother. We’ll still have some seasonal builds to our inventory Q3, just thinking about moving into the seasonality of Crisco oil, Crisco shortening for baking, Bear Creek dry soup will still have some build, but we won’t have this inventory from having to buy everything on a seasonal pack once a year. That impact was largely in the canned business. This doesn’t imply a change in my view of Green Giant Frozen.
This implies an opportunity to divest the Green Giant canned business that I don’t think was a good fit with us long-term, where we had to carry all this inventory we had in a high interest rate environment in a category that is mature and slightly declining and we were the second branded player. I still have the same questions that we’ve talked about on Frozen, the business going forward. I believe that we’re going to have to fix the economics, which we are making some progress doing. Right now, the category overall is a little soft as you’ve heard from other Frozen players and we need scale in distribution logistics in a Frozen network to make this work because our costs are going to market right now, probably a little bit higher than people who have larger scales and you need that scale to make it efficient.
So I haven’t changed my view on Frozen, honestly. This, to me, was a natural buyer for this business. It made sense, made our balance sheet a little bit cleaner, gave us a little bit stronger focus on trying to fix some of the fundamentals on Frozen in the meantime, but look, I’ve been pretty clear that where we’re driving right now is first and foremost, the focus on spices and seasonings, where you see higher margin business with good trends. You saw us, we’re innovating. We’re driving that business. We’ve got good sales growth this quarter, good margins. I think we’ve got good plans to keep going on that business. So that’s the first place that we want to focus as a company. The second place I’ve talked about is the meals category, specifically kind of Mexican meals, behind the Ortega brands, the Las Palmas brand, driving that, getting stronger innovation.
We’ve kind of upgraded our focus on that business now that Bruce talked about. That’s the second place I want to focus and then third is the specialty business, which I define as businesses that we can run with good, stable cash flows, stabilizing kind of margins and top lines. The Green Giant Can business did not fit that model. So keeping those kind of businesses and running them well. Crisco is part of that, but we’re managing that for kind of gross profit and stability over time and I think doing a good job at that, but it looks a little bit different, but the specialty business, we would look at that as how do we run those efficiently and well, and maybe even acquire some more of those businesses that we can plug in and run efficiently with good, stable cash flow in a high leverage environment.
The question mark for me is Frozen. It’s Frozen, because I think we have to improve the funnel economics on the business. We have to figure out how to improve our distribution and Frozen network and get a little bit more efficient in order for me to say that’s a long-term focus for a company. So hopefully that’s clear. If we kind of implied anything else, maybe that kind of helps you think about the way we drive the portfolio.
David Palmer: That is super helpful. I think I was piecing together some comments you made at a conference previously in the fall and then ran with this, what you’re doing here and thought maybe you were shifting a little bit more than you were. So my apologies for misinterpreting those two things. I just wanted to ask Bruce and Casey, is there any early read for 2024 that you feel like sharing with us in terms of the key gross margin drivers, pricing, productivity, inflation, anything that we should be thinking about for our models, particularly the first half?
Bruce Wacha: Yeah, I think we’ll give you more formal guidance with the fourth quarter release, but I would say right now, there’s some signs that we’re picking up already. So one is that our read on inflation right now is like 1% to 2%, which I’m almost doing backflips because given the last two years, that’s quite an improvement. So we have about 1% to 2% inflation. We don’t think we’ll have a lot of pricing, but there may be some tactical pricing on certain commodities that might be disproportionately going up, but broadly, I don’t think we’ll have a ton of pricing. We will a little bit, as I said, on the places where we need to and we have good justification. We are ramping up our productivity. So we’re getting much stronger cost savings.
We kind of started that formally last year to really track and measure how much we’re driving. We’re stepping up our expectations next year, and we’re getting good delivery on that. So I expect to see some margin improvement from productivity, and I expect to see productivity offset some of that 1% to 2% inflation that we can’t cover with pricing. Honestly, I feel pretty good about the track of our businesses, most of our businesses. Crisco, honestly, I don’t know how to call it because it depends on how much oil goes up or down, which is where we’ll price accordingly. I would say the only place we got to see improvement in the business to get good, solid, kind of top line progress where we want to be in that 1%, 2% range. We need to kind of get the Frozen business performing better than it is now, but that’s kind of what I’m seeing.
I’m seeing kind of a more steady state environment that we’re heading into next year, inflation monitoring down to 1% to 2%, much more limited pricing actions, getting back to kind of the fundamentals of driving some of our brands in the portfolio and doing the right things to drive cost savings in the business.
