There’s still a little bit more disruption related costs to get out, primarily in some of our other businesses outside of NAR. So, that will give us a little bit of tailwind. But to your point, given the volume environment, that’s largely going to go to offset the impacts of deleverage.
Pamela Kaufman: Thank you.
Operator: And our next question is coming from the line of Matthew Smith with Stifel. Please go ahead.
Matthew Smith: Hi. Good morning. I wanted to follow up on the elevated level of HMM savings here in the year. You mentioned, it’s a step-up relative to the prior two years where it was a bit lower because of inflation and supply chain issues. But how much of the elevated rate here this year is a pull forward from savings that you would expect next year? Or, I guess, that’s another way of saying just how sustainable is this elevated rate of HMM savings as you exit fiscal 2024?
Kofi Bruce: Look, I would expect that if the supply chain environment remains stable and continues to stabilize even a little further, we will have the ability to deliver at least in line with our historic levels of about 4% HMM, 4% of COGS. I would expect that the contributions from getting out some of those other disruption related costs that sit in COGS to decrease a bit here as we’ve gathered a good chunk of them on the back of our NAR business and as we see maybe a smaller base of costs in the other three segments. So, all things equal, I think 4% would be a good long-term estimate for us to migrate back to, provided the supply chain environment continues to cooperate.
Matthew Smith: Thank you, Kofi. And Jeff, maybe a follow up about your share performance as you begin to lap the rebuild of competitive distribution, which I believe you said that begins to move into the base as you exit fiscal 2024. You’re holding and gaining share in the majority of the distribution of your category. So, would you expect your dollar market share performance to improve as you lap that competitive rebuild? Or are there other concerns like consumer value seeking behavior or list price gaps that may need to be addressed as the share of shelf normalizes?
Jeff Harmening: Yeah. One of the things that I’m most pleased with is that, over the last five years, particularly in North America Retail, we’ve gained share in 60% of our categories and we continue to execute well. And the key to our success, once we start to lap the on-shelf availability and once we lap the pricing activities from March and April, will be to the question that Andrew posed, which is making sure we maintain our brand building support and really good brand building, make sure we execute against what I think is really good innovation and continue to execute in store. And if we do those things, and I would expect us to do those things, then our share performance will certainly improve over time. And, hopefully, as we’re exiting this fiscal year and beginning next fiscal year, we’ll see that happen.
Interestingly, our dollar share performance has not been what we needed to be. In terms of pound share, we are growing pound share in about 40% of our categories. And that’s because even though our pricing trailed inflation, so we responded to inflationary pressures, we’re actually more agile than our competitors. And so that provided us a dollar share benefit last year, and this year it’s a headwind. But we are growing pounds here in roughly 40% of our categories.
Matthew Smith: Thanks, Jeff. I’ll leave it there and pass it on.
Jeff Harmening: Thanks.
Operator: Our next question is coming from the line of Michael Lavery with Piper Sandler. Please go ahead.
Michael Lavery: Thank you. Good morning.
Jeff Harmening: Good morning.
Michael Lavery: Just wanted to — have a couple of follow ups on the shelf availability. You said it’s improving for competitors. Would you say that there’s still headwinds to come there, or is that sort of all caught up to a normal level? And then on the promotional sort of dynamic related to that, you gave some color on how that environment looks. But just given your guidance update, it would seem like strategically you’d rather take a little bit of the volume hit than push promo much harder. I suppose, first, is that a fair characterization? And what would make you lean in more on the pricing side?
Jeff Harmening: On the on-shelf availability, I mean, the competitors have kind of caught up to our levels, and that’s been pretty stable for the past few months, and I wouldn’t expect that to accelerate. So, I think we’ve seen a stabilization in that. Now, we’ll see that their on-shelf availability kind of — which is equal to ours, I’ll remind you, so, actually, we’re doing quite well. So, it’s equal to ours. We’ll see — they will see that benefit for the next three or four months until they start to lap it a year from now. And so, while it is stabilized, we’ll see some of our competitors see a benefit for that for the next few months, and then they won’t. In terms of the pricing environment itself, I’m not really going to get into specifics of future pricing.
What we do see is that, I think, importantly, we see an inflationary environment ahead of us. I know there’s been talk of deflation in some cases, and that may be true for things like commodities like milk and eggs, but it’s certainly not true for restaurants. Their inflation is actually outpacing ours, and we see inflation in the low single digits. You look at the category pricing and it’s somewhere in the 2% to 3% range. So, we see continued inflation even at a lower level. And, usually, pricing tends to follow inflation, because that’s the basis on which we increase prices if we see an inflationary environment. And so, the — as we look at trade-offs, I mean, our job is to create long term value for shareholders, and we do that by serving consumers, and we’ll do that by making sure that our brands are strong and by innovating and making sure the products are available when and where people want them.
