We’ve seen it more recently, obviously, in a real catch-up. But I think we’re probably at the high watermark in terms of elasticities. As we go into next year, we’re lapping a lot of this pricing. Consumers are becoming much more used to different price points. We talked about our return to quality merchandising, a lot of things to believe are going to point to a good industry environment, despite all the macro pressures that are well understood and that are putting pressure on the consumer.
Michael Lavery: Okay. Great. Thanks so much.
Operator: Thank you. Our next question comes from Max Gumport of BNP Paribas. Your line is now open. Please go ahead.
Max Gumport: Hey. Thanks for the question. Just on the volume in North America. You’ve given some color already. I know you’ve touched on the slower return to merchandising and innovation and also the lapping of trade inventory build last year. So I was just hoping you could maybe quantify some of those buckets in terms of just order of magnitude. How much of the decline was due to the lap? How much was due to the lower return? And then maybe how much is due to just slower category growth or share performance? I realize this is all very tough to do, just hoping for a bit more color there. Thanks very much.
Steve Cahillane: Yeah. Max, I think just directionally, the big buckets are the merchandising activity and the pricing and the innovation. Those are really the three big buckets, all entirely controllable as we look to the future. The pricing, we’re lapping; the innovation, we’ve got a better plan; the merchandising activity, we’re returning. So that’s why I say, when we look at the health of our brands, we’re very encouraged because you’re talking about Pringles, Rice Krispies Treats, Cheez-It, these are big power brands that are loved by the consumer, showing no signs of diminution with consumer loyalty. And so those are the three items that really make up the biggest buckets that’s pressured volume up to this point.
Max Gumport: Got it. And then one more on the US, there was a large grocery retailer this morning that reported results, and they called out that they now have evidence that the emergency allotments of Snap rolling off, maybe have been a bigger impact than expected. I think their numbers were — initially would have expected the minus 200 basis point impact on sales, and now it’s looking more like a minus 400 basis point impact on sales growth. Just curious if you’re seeing a similar type of impact among your lower-income consumers.
Steve Cahillane: Yes. I haven’t seen those results yet. But SNAP is obviously one part of the elasticity story. We’ve taken, as an industry, significant pricing while the consumer has been under pressure. And so I think it’s probably — you’re seeing that in the overall elasticities. What SNAP is — it’s hard to quantify for us, but we’ll certainly study what you’ve just mentioned.
Operator: Thank you. Our next question comes from Bryan Spillane from Bank of America. Your line is now open. Please go ahead.
Bryan Spillane: Hey, thanks operator. Good morning, everyone. I just had one — just wanted to ask one clarification and I have a question. In the appendix of the Day at K presentation, there are hard currency-neutral dollar targets for sales and EBIT by segment. So just the — I’m just trying to understand, is — are those not valid anymore? Just because you reiterated coming on algorithm for 2024 but didn’t really address the hard targets. So I just want to make sure we should be still — should we still be using those as a guide as we’re modeling for 2024?
Amit Banati: Yes. So I think, Bryan, we’ll give you the details when we close out 2023, right? I think from a growth rate standpoint, like I said, we fully expect to be on long-term growth algorithm for 2024. I think as you’d appreciate, right, currencies will be different when we close out 2023 versus the assumptions that we had made in August. Like I had mentioned on 2023, we are — at the end of nine months, we are ahead of pace versus the guidance that we had given. And so where we close out from a 2023 standpoint. So I think those kind of pace and currency adjustments would cause the absolute to differ, but we were right in the middle of that work as part of our budget. And I fully expect our long-term growth rates to be on algorithm.
Bryan Spillane: I guess — but those ranges are currency-neutral that you provided. So I don’t know maybe the accounting is changing. It’s just — so I guess, we’ll wait till February to get it but…
Amit Banati: Yes. So it’s currency-neutral, right? The overall rates that we had given for the company included a view of currency, right? So that’s for the total Kellogg Company, the ones that we had given in our preliminary 2024 guidance. Where there are currency-neutral numbers, those won’t be impacted by those view of the long-term rates. But the rates number base change, right, depending on where we end up on 2023.
Bryan Spillane: Okay. And then just you talked about margins kind of recovery happening a little bit faster than normal. So again, there was an implied margin that is just under 14%, I guess, the middle of that range, currency-neutral next year. So should we — is it possible that since you’re running ahead, we could even be a little bit further ahead in terms of margin recovery for next year?
Amit Banati: Yes. We talked that as we kind of complete the budgeting process, Bryan. I think it’s a bit premature for me to comment on that. But yes, margin recovery is recovering faster. You’ll see that in our results. And we’ll give you the specifics on 2024 when we get to it.
Bryan Spillane: Okay. Thanks.
Operator: Thank you. Our next question comes from Alexia Howard of Bernstein. Your line is now open. Please go ahead.
Alexia Howard: Good morning, everyone.
Amit Banati: Good morning, Alexia.
Alexia Howard: Hi, there. So a couple of questions here. You mentioned a couple of times that you were late coming back with merchandising and promotional activity and that, therefore, it was quite a bit lower in the first half of 2023 than your normal run rate would be. Does that mean that the lap that lower promotional period in 2024 that in the developed markets, we could actually see pricing modestly down? I don’t know about the timing of the price increases, but I’m just wondering how we should think about that cadence.
