Sean Connolly: Yes. Let’s talk about it. First, no door slam, okay, so what we are seeing right now is very consistent with what we expect. And it was an excellent quarter. And things are unfolding the way we would expect. With respect to Grocery & Snacks volumes, Grocery & Snacks volumes came in right where they should have come in, given the magnitude of pricing we have taken in the first half of this year. Now, in terms of what you are observing, good eye, the shipment numbers look about 2 points worse than what you might expect given the elasticities that we have talked about. That does not reflect a Q2 phenomenon. That reflects strong shipments in this segment in Q2 a year ago. Why was that, because that’s precisely when we came off allocation on a handful of brands in G&S.
And our customers, as you can imagine, these are good strong brands, we are quite eager to replenish their inventories. So, that’s €“ when I look at that number, I see about 2 points of what might look like an excess drop on in volumes. It’s entirely about the year ago period, nothing about right now. So net-net, what keeps us up at night, it’s the stuff that we can’t predict. It’s like a return of some kind of new COVID strain or more unexpected friction and supply chain because you can’t get materials from suppliers, things like that. As we have said, we are making good progress in supply chain, but it’s not perfect yet. We still have more junior people. Our labor situations got significantly better, but we have got newer employees who are still ramping up the learning curve.
These are the things that drive the volatility. And it’s led us to have our year-to-go outlook stay in a range, I would describe as prudent given that we are making progress. But it’s not all the way back to right. Dave, you want to add to that?
Dave Marberger: Yes. I would just add. I think David, when you start looking quarter-to-quarter and then at the segment level, because these are shipments and there is timing, you are going to get some dynamics. I would just pivot and say, if you look at our first half, we are shipping at 9%, and consumption is 10%. So, we have always said, we shipped the consumption. That’s what’s happening. We feel good about where we are with retailer inventories. We feel good about our own inventories, the elasticities as we showed on the chart are at that sort of 0.5 level and they have been there. And that’s the entire portfolio. So, you do get some dynamics quarter-to-quarter, which Sean, described. But generally, we are tracking in line with consumption.
Sean Connolly: Yes. Before we go to the next question, I want to come back to volumes for a second, because this is a really important one for folks to get right as you think about assessing kind of where we are, is it a good guy or a bad guy. To accurately assess volume performance across a cohort of companies, you have to look at total scanned volume change over time for the whole peer set. And as you saw on Slide 8, Conagra ranks number one in our peer group in terms of volume and resiliency over the past 3 years, which is, obviously, a testament to our brand health. And as I have said in my prepared remarks, there is always some elasticity when you price as much as we have cumulatively, but those elasticities have in fact been relatively benign and remarkably consistent and they have been lower than our peers, lower.
That’s the data. So €“ but in any given quarter and in any good segment, frankly, you may see more or less volume impact based on the recency of the pricing actions that you take. And as you know, we took a lot in Q1 and in Q2. But overall, we are in very good shape in the absolute and versus others. And don’t forget, over €“ as we have said many times, over time, these elasticities tend to wane as consumers adapt.
David Palmer: Thank you.
Operator: Our next question comes from Max Gumport from BNP. Please go ahead with your question.
Max Gumport: Hey. Thanks for the question. I am wondering beyond price elasticities, which can sometimes be a bit of a blunt measurement of the reaction of consumers to price increases, especially given the broad-based nature of pricing across the industry. I am wondering if you have seen any changes in the degree or ways in which consumers are trading down. For instance, from food-away-from-home to food-at-home, from branded to private label or to more value branded products or maybe between grocery categories? So, I am just curious what you are seeing on that front and how you would expect this dynamic to develop from here? Thanks.
Sean Connolly: So, Max, I think it’s pretty simple. The first big trade down is the trade down from away-from-home to at-home. If you are looking at consumers over $100,000 a year income, you are still seeing they are going out to eat. But below that threshold, it’s not where it was pre-pandemic. So, one of the reasons €“ a big one of the reasons why you see muted elasticities across the sector on average is because there has been €“ there was a trade down into at-home eating during COVID. And that has not fully reverted to away-from-home because the prices away-from-home have gone up so high that it’s a better value to continue to eat in home as people are trying to stretch their household balance sheet. And we are the beneficiary of that.
And it shows up in muted elasticities. When you double-click down from there, within grocery, what you see is there is trade down taking effect. And if you look at private label by category, you can see that in certain categories, they are making progress. Those categories almost, always tend to be categories that are more highly commoditized. So, things like in food, like cooking oil. And outside of food, things like ibuprofen. When a consumer knows it’s a single ingredient product and one is a lot cheaper than the other, the switching costs are lower. It’s easier to make the trade down. So, that is happening. The good news for us is we don’t have a lot of those categories. We have had them. We exited them. And now our private label interaction is lower than average in the space.
And on a strategically important stuff that’s really vital to our go-forward cash flow, things like frozen, our snacks categories, we have got very strong relative market shares, very little private label alternative, and that’s one of the reasons we continue to thrive.
Max Gumport: Great. Thanks very much and one follow-up. It looks like you took your CapEx guidance down from $500 million to $425 million. I am just wondering what’s driving that change? Thanks very much.
Dave Marberger: Yes. Max, that’s all timing. We are still prioritizing investing in capacity and automation in our supply chain, which we have talked about. So, that’s all just timing for the fiscal year.
Operator: Our next question comes from Pamela Kaufman from Morgan Stanley. Please go ahead with your question.
Pamela Kaufman: Hi. Good morning.
Sean Connolly: Good morning.
