Pamela Kaufman: Just had a follow-up to your last response, in general, it seems like the softer macro backdrop this year creates a favorable environment for your business and for food-at-home consumption. So, as consumers look for savings, can you just talk about how your categories and how frozen dinners have performed in prior recessions? And how are you leaning into this opportunity and highlighting the value to consumers?
Sean Connolly: Yes. Our frozen business has been unbelievably strong. And I don’t think you can compare it at all to the 2008 period, the financial crash because the category looked totally different. We started doing a massive overhaul of the frozen section of the grocery store, Conagra did in 2015, starting with frozen single-serve meals. And we completely changed the way those products show up to the consumer in terms of food quality, packaging quality, sustainability, etcetera, etcetera. And since then, we have driven a massive amount of growth for retailers in the frozen single-serve meals category. And Conagra has accounted for somewhere in the neighborhood of 90% of that growth. So, we have almost singlehandedly done it.
What we are doing now is keeping the momentum in frozen, in single-serve meals where we have been so successful because there are structural things in place that have only furthered the opportunity there. Things like more people working from home during the week, that obviously contributes to more breakfast and more lunch, vacation at home where these products fit. So, we are capitalizing on that. The other part of our strategy is to continue to €“ we have got a great suite of brands, continue to extend them into adjacencies like multi-serve meals, appetizers, snacks, desserts, novelties, things like that. There are a lot of zip codes in the frozen space that still have opportunity to be overhauled, the way we have overhauled frozen single-serve meals.
And that’s a big part of our go-forward strategy. And one of the things that’s going to help create value with this portfolio, along with this awesome snacks business that we have got. And we will talk about both of these very strong, attractive portfolios in frozen and snacks in quite some detail at CAGNY.
Pamela Kaufman: Great. And just on the supply chain, it sounds like it’s getting better, but there is still room for improvement. Can you talk about where you still see supply chain challenges, and where there is room for improvement, where are your service levels today versus targeted, and how much gross margin recovery can those drive on top of the improvement that you saw this quarter?
Sean Connolly: Yes. Let me €“ it’s Sean. Let me tackle that, and Dave, if I miss anything, jump in. But we were absolutely seeing meaningful progress in supply chain. But you got to remember that the industry has continued to see operating challenges, including labor across the end-to-end supply chain has not abated. You are hearing that from me. You are hearing it from my peers. So, it is possible for Conagra to make meaningful progress. But also to see €“ continue to see pockets of friction. In terms of specifically whether we think productivity is improving, and we are pleased with the progress on our supply chain initiative, service levels, and fill rates have continued to improve over prior year. In the second quarter, our fill rates were over 90% by the end of the quarter.
On average, in some categories, frankly, were well above that and more back to normal, which is an awesome sign. Productivity initiatives remain on track. But the point we are making here and one of the reasons for our guidance is, progress isn’t necessarily going to be linear. Productivity savings aren’t fully offsetting input cost increases from commodities volatility, things like labor, transportation costs and other supply chain inefficiencies since the supply chain is not yet fully normalized. We €“ on labor, we have filled more positions. We are seeing less turnover, but because our labor force, as I mentioned a few minutes ago, is less experienced, it’s still efficient. But obviously, that’s going to improve as these newer employees crash the learning curve.
So, that’s kind of what we are seeing overall. Dave, do you want to add anything or I hit it?
Dave Marberger: Yes. I would just add to your question about margins. So, if you look at the Q2 bridge that we have in the deck, the operating margin bridge, you see the productivity and other cost of goods sold at plus 1.3% of margin points. And once we get to a more normalized supply chain operation, we would expect that to improve. We are not going to give specific numbers, but that’s where you would see it in the margins.
Pamela Kaufman: Got it. Thank you.
Operator: And our next question comes from Robert Moskow from Credit Suisse. Please go ahead with your question.
Robert Moskow: Hi. Thanks. Sean and Dave, one of the major concerns I hear from investors is that the top line trends are so robust right now, are going to dissipate by the end of the year, because you are going to lap the vast majority of the pricing actions that you have taken. But you did talk about more sequential pricing that’s going on right now. So, I guess I would like to know, by the end of the calendar year, and I know it’s €“ you can’t talk about fiscal €˜24, but by the end of the calendar year, do you think they will still be in kind of like mid-single digit pricing territory given where pricing is today in fiscal 3Q? And then lastly, maybe you can talk a little bit about the retail reaction to all the price increases. The rhetoric seems to be getting a little more combative on the margin. And I wanted to know if you thought there is any changes in those negotiations. Thanks.
