Noel Wallace: Great. Thanks and good morning, Andrea. So let me take the advertising and promotional piece, and I’ll come back and add a little bit of context on some of the great work that Luciano has done as he’s come into the new role. The strategy has been quite consistent for the last three to four years about our ability to build brands through great communication and great innovation. And you’ve seen that obviously flow through the P&L. And despite the fact that we have obviously grown and accelerated advertising meaningfully over the last couple of years. We’ve continued to deliver against our guidance and exceed our operating profit objectives, which is terrific. Well, that just gives you a sense for the health of the P&L today and our ability to continue to fund investment going forward, and that will clearly be our strategy.
Now, likewise, it gives us flexibility to be very focused on the efficiency of that spend. And I can assure you there’s not a discussion that goes by where we don’t talk about reach and frequency, and the ROI associated with our spend, both at the digital level and the linear TV level. So we’re very, very, very focused on the ability to drive more efficiency through the P&L as we accelerate our advertising. And as we said in the prepared comments, we anticipate to continue to accelerate the advertising into 2024. Promotional environment is very constructive right now. I would say it’s about 75% to 80% of the pre-COVID levels. So it’s come down. It’s more moderated. We — as I’ve mentioned, in second and third quarter calls, that we will be very selective on increasing the cadence of our promotions in some of the geographies where we may have taken a little bit too much pricing as we led in some of those markets.
That will be prudent and thoughtful and focused in certain select markets. But overall, the promotional environment seems very constructive. And our objective is to drive category and healthy volume growth through obviously the accelerated advertising line. On the supply chain, Luciano has come in and really thinking about the continued transformation of that, bringing a lot of good ideas on automation and data analytics and driving network optimization. A lot of our focus over the last couple of years, particularly at Hill’s, was increasing capacity, and you saw that through our capital expenditure line. That will moderate as we move forward with more spending being allocated towards efficiency and savings and optimizing the network and very much digitizing the supply chain and getting very aggressive on using data analytics to optimize our efficiency and our case field level.
So overall, pleased with where he’s taking the group and that team has done just an extraordinary job getting us ready for further optimization moving forward.
Stan Sutula: And, Andrea, I’ll just pick up on your last comment around the issues out in the Red Sea and the shipping. So we’ve been also proactive on that, looking at alternate methods where available, planning for the lead time disruption. And the rest of the supply chain has remained stable, so we don’t see issues there. But we have anticipated longer lead times than planned appropriately for 2024.
Operator: The next question comes from Filippo Falorni with Citi. Please go ahead.
Filippo Falorni: Hey, good morning, everyone. So, Noel, going back to Hill’s, clearly, high single-digit top line growth, excluding the private label, discontinuation, very strong results in the quarter. As you think about ’24, like, can you give us a sense of how you see the volume for that business evolving and also the pricing environment in pet food. And then at the margin line, you saw a pretty significant cost headwinds in 2023. Are you seeing any moderation on the cultural and protein side for the Hill’s business? Thank you.
Noel Wallace: Yeah. Good morning, Filippo. Thank you. We see more balanced volume and price as we move into 2024. Obviously, we’ve had roughly six quarters of aggressive pricing, seven quarters where we’ve had to take pricing to offset a lot of the inflation that we’ve seen in agricultural products. To get to your second part of your question, we do see ag prices beginning to moderate, which is good, which over time, as we see the pricing settle out in the markets, we anticipate that volume will come back. But remember, this is the one category we compete in where we’ve seen prolonged inflation as we move through the back half of 2023. But we anticipate that will definitely moderate as we move into 2024, and pricing likewise will moderate, and we’ll see a return to really continuing to drive that successful household penetration number that I shared with you earlier, which is obviously our ability to continue to support strong advertising.
So overall, we’ll see that more balanced growth as we move through 2024. And on the margin line, as I mentioned again, a more moderating cost. We’re still lapping some of the strong inflationary environments that we had in the first half of last year. So that pricing that we’ve taken in the back half of this year and early in the quarter will stay, but we’ll see the volumes start to come back as we move through the back half of the year more meaningfully.
Operator: The next question comes from Callum Elliott with Bernstein. Please go ahead.
Callum Elliott: Hi, good morning. Thanks for the question. Really good to see the big uptick in brand spending this year and the success it’s having on competitive performance and growth. My question is, can you talk about some of the other investment buckets outside of advertising and brand spend? I’m thinking R&D, CapEx, some of the more infrastructure capability investments that sit in the P&L. Where are you guys today now versus where you think you need to be? And what’s the relative importance of these non-brand spend buckets in your view? Thank you.
