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Speaker 1: Let's look more about a company that makes spreadable marshmallows,

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Speaker 1: amongst so many other things. James CEO Marx Swucker joins

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Speaker 1: us now. Mark, great to see you, Thanks for taking

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Speaker 1: the time. Look, Simone's just kind of laid out what

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Speaker 1: is happening here. What would you add to that. What

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Speaker 1: trends do you think are showing up in your numbers,

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Speaker 1: showing up in your results. That tell us about what

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Speaker 1: is happening with the consumer and the trends that we

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Speaker 1: need to be watching for.

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Speaker 2: You know, the consumer. There are some consumers out there

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Speaker 2: that are seeking value right because there has been you know,

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Speaker 2: a fair amount of inflation. Our portfolio specifically is performing

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Speaker 2: exceptionally well. We've got almost eighty percent of our brands

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Speaker 2: are growing or maintaining share, and a volume perspective that's

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Speaker 2: closer to eighty seven percent, So our base business is

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Speaker 2: very strong. We've seen good performance in coffee, great performance

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Speaker 2: in our Incrustable's business that's the frozen PB and Jay sandwiches,

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Speaker 2: and then our pet snacks and cat food are also

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Speaker 2: performing very well, mid single to low double digits, so

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Speaker 2: great performance. Consumers continue to look for value. We play

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Speaker 2: in all segments in our categories from value to premium.

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Speaker 2: So our portfolio is performing very well.

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Speaker 3: Hey, Mark, any consumer trends that you've noticed in terms

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Speaker 3: of where do you have less pricing ability and where

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Speaker 3: are sales a little weaker?

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Speaker 2: Now, Yeah, we have actually taken price increases over the

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Speaker 2: last you call it eighteen months, but in the last

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Speaker 2: six months there hasn't been a lot of movement. In fact,

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Speaker 2: our coffee pricing has come down. We've seen the commodity

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Speaker 2: come down, and therefore we have actually passed a long

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Speaker 2: price declines to the consumer. And so we're seeing again

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Speaker 2: making sure that our portfolio meets the needs of the

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Speaker 2: consumer all the way from value to premium, and it's

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Speaker 2: been working.

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Speaker 1: So Mark, if that continues, if input costs continue to

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Speaker 1: be reduced, would you expect therefore disinflation prices? I think

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Speaker 1: less slowly to turn to deflation. Eye price is actually falling.

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Speaker 2: I think it's too early to say that broadly, and

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Speaker 2: it's hard, you know, as a I'm not an economist,

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Speaker 2: so I don't have a crystal ball. But what we

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Speaker 2: really need to focus on as a company is making

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Speaker 2: sure that as we pass along pricing that we're judicious

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Speaker 2: and prudent and that we're only a passing along what

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Speaker 2: is justified. And again, we haven't seen a lot of

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Speaker 2: change in pricing other than coffee pricing giving us a

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Speaker 2: little bit of relief in these last couple quarters.

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Speaker 3: So currently it's maybe not going up more. Is maybe

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Speaker 3: our takeaway from you. Let's go to the AZEMPIC story

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Speaker 3: of a GOV story, the weight loss drug story. You've

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Speaker 3: said you're not seeing an impact yet. Where are you

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Speaker 3: looking to potentially see an impact?

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Speaker 2: You know, we watched this very carefully. You know, we

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Speaker 2: just acquired Hostess. We play across multiple snacking categories consumers

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Speaker 2: because we're very focused on what they need. We have

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Speaker 2: a very robust insights team and we study this all

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Speaker 2: the time. We see that consumers continue to snack multiple

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Speaker 2: occasions per day. Sometimes that might be a sweet coffee

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Speaker 2: beverage in the afternoon, other times it might be a

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Speaker 2: sweet bag good. So even in our portfolio, whether that's

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Speaker 2: encrustables or our Hostess products, we are making sure that

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Speaker 2: we're offering options like individually individual portions, bite size options,

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Speaker 2: making sure that we're innovating and that as we listen

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Speaker 2: to consumers, the products that we bring out are meeting

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Speaker 2: those needs of the consumer as they evolve.

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Speaker 1: Mark, I want to talk more about Hostess in just

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Speaker 1: a moment, but just sticking with this theme of the

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Speaker 1: of snacking on people's behavior, how much of this is

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Speaker 1: pandemic behavior that is stuck.

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Speaker 2: Well, you know a lot of folks have remained eating

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Speaker 2: at home. They eat at home more than they have

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Speaker 2: If you think about coffee occasions, seventy percent of cups

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Speaker 2: of coffee consumed are still consumed at home. So although

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Speaker 2: consumers have returned to eating out, and there are definitely

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Speaker 2: some trends in that direction, consumers continue to consume products

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Speaker 2: at home, even the coffee that they used to drink out.

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Speaker 2: They're trying to make those beverages at home because it's

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Speaker 2: more affordable in many cases.

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Speaker 3: So going to host us for a moment for those

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Speaker 3: who don't know Twinkies host Us cupcakes. There are concerns

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Speaker 3: on the market about the increased debt level that you

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Speaker 3: had to take on in order to pay for that.

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Speaker 3: What are some of your plans and timelines to reduce

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Speaker 3: that leverage.

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Speaker 2: So the price that we paid, you know, is generally

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Speaker 2: in line with market valuations, and so we're really excited

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Speaker 2: about this brand. You know, we are going to focus

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Speaker 2: on debt pay down. We would like to get back

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Speaker 2: to about three times leverage over the next two to

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Speaker 2: three years. We're very confident in this portfolio continuing to

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Speaker 2: generate cash and shareholder value, so we don't see that

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Speaker 2: being an issue and it will allow us to de

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Speaker 2: lever quickly and ultimately, you know, obviously continue to pay

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Speaker 2: dividends and ultimately we'll get back to some share repurchases.

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Speaker 1: Mark, how are you thinking about how the brands fit

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Speaker 1: together as well? Is there any cannibalization Probably a poor

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Speaker 1: choice of words here in terms of kind of how

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Speaker 1: the brands fit together, one peanut butter versus another pedu like,

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Speaker 1: et cetera, et cetera. How's it working in terms of

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Speaker 1: managing the integration of that Hostess acquisition.

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Speaker 2: Yeah, we're not seeing a lot of cannibalization. You know,

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Speaker 2: even if you think about peanut butter and jelly and

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Speaker 2: folks are moving to a convenient form of that. In

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Speaker 2: terms of uncrustables, there's any given moment, a consumer might

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Speaker 2: be choosing a PB and J sandwich, but in another

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Speaker 2: moment they may choose a Hostess product just like you have.

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Speaker 2: So we have not seen any significant cannibalization and we

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Speaker 2: continue to focus on the different occasions or parts of

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Speaker 2: the day where consumers are going to reach for these products.

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Speaker 3: In terms of the merger, again with Hosts, to go

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Speaker 3: back for just a moment, is there anything that you're

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Speaker 3: considering spinning off or selling or divest as you've started

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Speaker 3: to take this next step in the business.

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Speaker 2: You know, as you may have seen, we have been

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Speaker 2: on a very significant portfolio reshape journally journey, which is

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Speaker 2: why our portfolio is very focused right now, and in aggregate,

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Speaker 2: we continue to grow. You know, we recently divested our

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Speaker 2: dog food business, We divested our pickle business in Canada,

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Speaker 2: and we recently divested our snack nests business, which is

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Speaker 2: a very small business, and prior to that, divested things

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Speaker 2: like our Crisco oils business. So all of that was

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Speaker 2: in service of focus and making sure that our portfolio

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Speaker 2: is totally optimized for growth, and it has paid dividends

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Speaker 2: because we've grown in basically fourteen of the last fourteen quarters.

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Speaker 3: So nothing else on the divestiture block as of now.

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Speaker 1: Mark.

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Speaker 2: We always consider what's in our portfolio, but we're very

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Speaker 2: happy with where our portfolio sits at this point in time.

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Speaker 3: All Right, Mark, thanks so much.

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Speaker 1: We appreciate it.

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Speaker 3: We very much appreciate having you on. Mark Smucker, CEO

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Speaker 3: of Schmucker, adjoining us