Michael Lavery: And you’ve touched in the past on potential consumer adjustments in terms of things like waste reduction, just using more leftovers, is that some of the behavior that might refer to prior norms, or that – is that some of the things you’re counting on as part of the change?
Steve Cahillane: Yes. I think it’s interesting, because you all on this call and we and all of our peers have been in search of where that volume is, right? And there’s been a lot of hypotheses. And I think the fact is it’s probably a lot of things that are hard to measure. One is managing the household pantry, less leftovers, more creativity. I think all those things have been coming into play, but they’re now — if you think about it, they’re in the base, right? You can only work that pantry so long, the pantry is not an infinite supply of stuff in the corners, so that’s been worked. But I think this new consumer behavior around less food waste and more – making sure that leftovers are really used is probably consumer behavior as far as we can tell, that will remain.
But again, it’s in the base. And so, I think there’s a normal, if you like. Now as the economy improves, if it does improve, if discretionary income keeps growing faster than inflation, you’ll likely see a return to kind of the pre-inflationary times as people become a little bit more comfortable. I think that would be a natural outcome. But right now, I think we see the continuation of that behavior, recognizing that it’s in the base.
Michael Lavery: And just a quick follow-up on LATAM. You called out the performance there being what it was despite the SKU rationalizations that you’ve had, can you just give a sense of maybe the magnitude of what that was? And are there incrementally new ones we should be mindful of modeling ahead? Or is this closer to winding down?
Amit Banati: I think it’s largely behind us. And so yes – but overall, we’re seeing good momentum in our LATAM business, both in Mexico as well as in Brazil.
Michael Lavery: Okay. Thanks so much.
Operator: Our next question today is from the line of David Palmer of Evercore ISI. Please go ahead.
David Palmer: Thanks. Good morning. Last quarter, I think you guided to 20 for the year, North America snacks organic sales growth, low single-digits. Is that still the thinking? And if so, how do you envision price versus volume this year for North America? Just looking at the last four weeks, and I know you highlighted in the last four weeks, I don’t know if that composition is how you’re thinking things will play out. But it does look like price per unit is down low single digits with volume offsetting that. And I’m not sure how indicative that will be?
Steve Cahillane: Yes, David, I think if you look at what’s happened in the last 18 months, two years, been too much price and not enough volume for obvious reasons. And now we’re seeing the – we’re starting to see the reversal of that in North America. And as I mentioned several times on the call now, we’re seeing a better volume performance. You can see that in the latest published data. We’re seeing a gradual recovery in that. And we are very confident in the back half of the year based on what we see in – right now in terms of our volume performance. So, we like the balance that we see returning to our business, and we have a lot of optimism that, that’s going to continue.
David Palmer: So do you think this is going to be one, where we maybe see volume even stronger than net sales in that division. Is that the kind of year, because you’re leaning in with high-quality merchandising that’s going to lead to some net pricing per unit offset to the volume that you’re going to get? Is that fair?
Steve Cahillane: I would just – I don’t want to go too deep into individual regions and volume price/mix beyond what we said, and that is, it’s getting a lot better. The volume performance continues to get a lot better. For us, the return to full merchandising activity, which we mentioned several times, is the real driver of that volume recovery. And we like what we see in terms of that balance. We like what we’re seeing with the reinvestments in our brands. We like what we’re seeing in terms of our share improvements in the marketplace, all those things combining to give us the confidence that we’ve been talking about.
David Palmer: And just a follow-up on supply chain was a constraint for the old Kellogg’s and Kellanova, perhaps more than most companies last year. I know it kept you from doing some of the things you’re doing now, the growth spending and – but also maybe on productivity initiatives. Are there certain metrics you could just talk about just year-over-year where you were, it can be the shift on time and in full. But other metrics, including productivity quarter – year-over-year in the quarter, that can give us a sense of how much the supply chain is a big helper? Thanks.
Steve Cahillane: David, I would just say I wouldn’t say that our supply chain was disadvantaged in the past. What we did say is we were perhaps more conservative than others in wanting to keep our supply fill rates at a very high level and therefore, did not return to full merchandising commercial activation as some of our peers did. Our supply chain right now is performing at a very high level, like think about pre-pandemic high watermarks in terms of on-time in full. So that’s where we are, and that’s why we have the confidence. In terms of productivity, we’re back to the type of productivity initiatives that we were pre-pandemic as well. So that’s been very, very positive. We announced worldwide a couple of productivity initiatives that we talked about last quarter that are proceeding very, very well. And so, we like where our supply chain is in North America, and we like where our supply chain is globally.
David Palmer: Thank you.
Operator: Our next question is from the line of Steve Powers of Deutsche Bank. Steve, your line is up and please go ahead.
Steve Powers: Yes, hi. Good morning, guys. Just a quick one. I guess a follow-up on that prior line of questioning on North American pricing kind of in combination with Andrew Lazar’s question on volumetric leverage. As you think about the benefits of volume leverage throughout the year, offset by the price investments that we’re seeing. How does that play out on net impact on margins? Is that a net positive and that drag just as we think about the sequential progression?
Amit Banati: Yes. I think, Steve, there are a number of things playing through in the margin, right? And like I mentioned earlier, right, we’re confident that our gross margins will be more than 35%. Within that, there are a number of moving parts. Obviously, inflation, which we set and continue, the guide continues to be neutral-ish across a number of cost elements. So that’s playing through the improved performance of the supply chain, is a tailwind this year. I think from a price standpoint, the price/mix is obviously moderating. So I think it’s a combination of those factors. Now we should start seeing some volume leverage as the volume trends improve. But all of that kind of factors into the – to our expectation that we continue to see gross margin expansion, not at the rate we saw in quarter 1, but we’d expect that the gross margins will continue to be – continue to improve and be north of 35% for the year.
Steve Powers: Okay. Very good. And Steve, I was hoping you can talk a little bit more about the Cheez-It’s expansion overseas. You gave some snippets – as you went region by region, you gave some snippets about kind of what to watch for. But maybe you could just pull it all together in aggregate and just talk about that initiative and kind of what to watch, for in aggregate as you progress through ’24, and we start thinking about further progression into ’25? Thanks.
Steve Cahillane: Yes. So we are excited about the Cheez-It and their international prospects. We’ve got Cheez-It now in Canada, Mexico, Brazil. We’re applying those learnings to the launch in Europe later this year, particularly in the U.K. And the U.K. team is very excited about it. The initial research on product and on positioning is very strong. And so this is not anything that’s going to really affect your models per se, because we’re taking it in a very pragmatic way market-by-market, continuing to build the playbook. So each next month is more successful than the one that came for it. And so ’24, will be the European launch. And then later in ’24, we’ll talk about additional markets for ’25, and beyond.
Operator: Thank you. And I’m afraid we have run out of time for any further questions today. So I’d like to hand back to Mr. John Renwick for any closing remarks.
John Renwick: Well, thank you, everyone, for your time and your interest. And if you do have follow-up calls, please do not hesitate to call us. Have a great day.
Operator: This concludes today’s conference call. Thank you all for joining. You may now disconnect your lines.
