Jeff Siemon - Vice President, Investor Relations Jeff Harmening - Chief Executive Officer Don Mulligan - Chief Financial Officer Ken Powell - Chairman and Former Chief Executive Officer

Andrew Lazar - Barclays Ken Goldman - JPMorgan David Driscoll - Citi Jason English - Goldman Sachs Bryan Spillane - Bank of America/Merrill Lynch Chris Growe - Stifel

Ladies and gentlemen, thank you for standing by. Welcome to the General Mills Quarter Four Fiscal 2017 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today, Wednesday, June 28, 2017. I would now like to turn the conference over to Jeff Siemon, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Nelson and good morning everyone. I am here with Jeff Harmening, our new CEO and Don Mulligan, our CFO. Also here is Ken Powell, our current Chairman and former CEO, who will share a few remarks in a moment. Before I turn the call over to them, let me cover our usual housekeeping items. Our press release on fourth quarter results was issued over the wire services earlier this morning. I’ll remind you that our remarks this morning will include forward-looking statements that are based on management’s current views and assumptions. The second slide in today’s presentation list factors that could cause our future results to be different than our current estimates. And before we get to our usual earnings commentary, I would like to turn the call over to Ken Powell, who last month wrapped up 10 years leading General Mills as CEO and he was continuing on as the Chairman of the Board for an interim period. We don’t have time this morning to cover all of Ken’s accomplishments over the past 10 years nor what he want us to. So, we will stick to just one that is near and dear to our hearts, shareholder return. During Ken’s tenure as CEO, total return for General Mills’ shareholders grew at an 11% compound rate, 350 basis points ahead of the broader market. So as a shareholder and an employee, I would like to say thank you for your leadership Ken and congratulations.

Well, thanks Jeff and good morning to all of you. First of all, let me say what a great honor it’s been to serve General Mills as CEO during the past 10 years. This is a great company with an outstanding culture of integrity, a powerful mission, a steadfast commitment to shareholders, and a never ending focus on serving our consumers. And it really has been an honor for me to serve such a terrific organization and I look forward to continuing to serve as Chair of the Board. I am pleased with how General Mills has evolved over the past decades. We are far more global. We have added many on-trend brands to the portfolio. We have a much leaner operating structure and we have made many important strides in our commitment to the environment and sustainability. And all the while, we have continued to attract and retain the best talent in our industry. Thanks to our strong values and our performance culture. As I look at General Mills today, it’s clear that we compete in a challenging era where the pace of change is greater than ever. And to win in this environment, it is absolutely imperative that we deliver innovation-driven top line growth. And you will see that from Jeff and Don as they take you through our presentation this morning and you will hear more detail at our Investor Day event on July 12. And finally, I want to thank our investors and the analyst community for your commitment to our industry and for your candid and constructive engagement with General Mills management. We appreciate everything you do and I know that Jeff and his team look forward to working closely with you in the years ahead. So, with that, I will turn the call over to Jeff Harmening.

Thank you, Ken and thank you for your leadership and your service to General Mills and thanks for providing outstanding guidance and mentorship to me over the years. I am honored to be taking the reigns and I am excited to write the next chapter of a book that spans a 150 years history of this great company. I am looking forward to continuing the track record of value creation that both you and your predecessors have delivered for General Mills’ shareholders. Now, let’s turn back to the business for this morning’s call. Fiscal ‘17 was a year of significant change for General Mills. We implemented a new global organization structure, continued our journey to become a truly global food company. We also accelerated some important cost savings efforts to improve our efficiency. These efforts went according to plan and we are happy with those results. But it’s clear some actions did not go according to plan. We have pulled back too far our investment in some key categories and our overall execution was not up to our normal standards. Our sales and profit suffered as a result. Still we were able to deliver 6% constant currency growth in adjusted diluted earnings per share and we returned $2.7 billion in cash to our shareholders. As we look forward, our top priority for fiscal ‘18 is to make significant strides toward returning our business to sustainable top line growth. Our plans call for investment and product news and innovation to accelerate growth for businesses where we have positive momentum and to improve those that are underperforming. We will also increase investment in capabilities like e-commerce and strategic revenue management, which are critical for growth today and will be in the future. With the biggest changes to our global structure and our supply chain now behind us, we expect to get back to executional excellence this year. These efforts will help us to deliver 200 to 300 basis point improvement in our net sales trends in 2018 compared to our 2017 results. On the bottom line, we expect profit and earnings per share growth to reflect strong cost savings partially offset by volume declines and investments I just mentioned. We have made significant progress to expand our adjusted operating profit margin over the past two years. We continue to see opportunities for future of margin expansion, including an increase in adjusted operating profit margin in fiscal 2018. But we will moderate the pace of expansion as we invest to restore top line growth. Looking forward, we are focused on delivering a balance of sales growth and margin expansion, along with strong cash conversion and cash returns to create top tier returns for our shareholders. With that as the back drop, let me turn it over to Don to review our fiscal 2017 financials and provide details on our 2018 guidance.

Thanks, Jeff and good morning, everyone. Let’s jump right into our fiscal ‘17 financial performance starting with the fourth quarter results summarized on Slide 9. Net sales totaled $3.8 million, down 3% on a reported and organic basis. Total segment operating profit totaled $673 million, up 4% in constant currency. Net earnings increased 8% to $409 million and diluted earnings per share were $0.69 as reported. Adjusted diluted EPS, which excludes certain items affecting comparability, was $0.73. Constant currency adjusted diluted EPS increased 14% versus a year ago. Slide 10 shows the components of total company net sales growth in the quarter. Organic pound volume reduced net sales growth by 7 points and was partially offset by 4 points of positive mix and net price realization. Now, let me turn to full year fiscal ‘17 financial results. Net sales totaled $15.6 billion, down 6% as reported and down 4% on an organic basis. Total segment operating profit totaled $3 billion even, down 1% in constant currency. Net earnings decreased 2% to $1.7 billion and diluted earnings per share were $2.77 as reported. Adjusted diluted EPS was $3.08, up 6% in constant currency. For our North America retail segment, organic net sales declined 4% in the fourth quarter, an improvement over the third quarter trend as we saw better performance in measured and non-measured channels. Full year organic net sales were down 5%. At the operating unit level, U.S. snacks posted net sales growth of 1% in the fourth quarter, an improvement over last quarter led by growth in Annie’s, Nature Valley, and Larabar, which offset declines in Fiber 1. Cereal net sales were down 1% in the quarter, with growth on Lucky Charms, Cinnamon Toast Crunch and Cheerios offset by declines on Chex and Kix. U.S. meals and baking net sales decreased 1% in the quarter, with growth on Totino’s hot snacks offset by declines on Pillsbury refrigerated dough. The full year net sales decline for U.S. meals and baking was due to the divestiture of Green Giant business in fiscal ‘16 as well as declines on soup and refrigerated dough. Canada constant currency net sales increased 2% in the quarter, with growth on Old El Paso and Betty Crocker. Full year Canada constant currency net sales declined 2% due entirely to the Green Giant divestiture. U.S. yogurt net sales declined 22% in the quarter and 18% for the full year. Constant currency segment operating profit growth increased 9% in the fourth quarter behind benefits from net price realization and reduced media expenses. Full year constant currency operating profit declined 2% reflecting the impact of the Green Giant divestiture. Fourth quarter organic net sales for our Convenience Stores & Foodservice segment were comparable to last year. This was the third consecutive quarter of sequential improvement. Full year segment organic net sales declined 3% with 2% growth on our Focus 6 platforms led by mid single-digit growth on cereal and yogurt, offset market index pricing on bakery flour and declines on frozen dough products. Segment operating profit grew 6% for the full year, driven by lower input costs and benefits from our cost savings efforts. In Europe and Australia, organic net sales decreased 9% in the quarter and 4% for the full year. Remember that last year’s fourth quarter included an extra month of results for Yoplait Europe as we aligned that business to our fiscal calendar. Excluding the difference, organic net sales would have been up low single-digits in the quarter led by growth in Häagen-Dazs and Nature Valley. Constant currency segment operating profit declined 26% in the fourth quarter and 9% for the fiscal year, impacted by the difference in reporting periods. Excluding the extra period, Europe and Australia operating profit was down mid single-digits for the full year due to currency driven inflation on imported products in the UK. In our Asia and Latin America segment organic net sales grew 8% in the fourth quarter including a double digit percentage benefit from an extra month of results from Brazil as we aligned that business to our fiscal calendar. Good growth in China and India was offset by the continued challenging environment in Latin America. Full year organic net sales increased to 3%. Segment operating profit declined $5 million in the quarter reflecting higher SG&A expense. For the full year segment operating profit increased to $84 million from $69 million a year ago. Turning to the full year joint venture results on Slide 16, CPW’s fiscal ‘17 net sales grew 3% in constant currency with growth across all regions. Häagen-Dazs Japan constant currency net sales increased 8% for the full year driven by continued momentum on recent innovation. Combined after tax earnings from joint ventures totaled $85 million for the year, down $3 million versus last year primarily due to unfavorable foreign currency and an asset write-off for CPW, which were partially offset by volume gains on Häagen-Dazs Japan. Constant currency after tax earnings were down $5 million. We delivered on our cost saving goals for the year with cost of goods sold HMM savings totaling $390 million and aggregate savings from our previously announced projects totaling $540 million. These cost savings more than offset inflation which rounded down to 1% for the full year and help to drive strong margin expansion. Full year fiscal ‘17 adjusted gross margin was up 50 basis points and adjusted operating profit margin increased 130 basis points to 18.1% of net sales. Turning to the balance sheet, our quarterly core working capital increased 9% year-over-year as the timing of receivables and higher inventory balances were partially offset by continued progress on accounts payable. Despite the increase in core working capital this fiscal year end, we made significant progress in reducing core working capital over the last 5 years. Since 2012 while net sales are up mid single-digits, we have driven core working capital down by over 50%. And importantly, we expect our receivables and inventory balances to normalize in fiscal ’18. In addition, we still see opportunities for further benefits from payables which together should drive down our core working capital this year. Full year operating cash flow was $2.3 billion, down 12% from the year ago, driven by the higher core working capital balance, changes in income taxes payable and lower incentive trade and advertising costs. Fiscal ‘17 capital investments totaled $684 million as a result full year free cash flow was $1.6 billion or 86% of our adjusted after tax earnings. Over the last 3 years our cumulative free cash flow represents 97% of adjusted after tax earnings above our 95% conversion target. And we expect fiscal ’18 cash conversion to be above that 95% as well. We paid $1.1 billion in dividends in fiscal ‘17 and dividends per share were $1.92, up 8% from last year. Net share repurchases totaled $1.5 billion and we reduced average diluted shares outstanding by 2% for the full year. Slide 20 highlights our key assumptions for fiscal ‘18, industry trends in the U.S. in the last few quarters have been challenging and we are not planning for a significant turnaround in those trends this year. We expect our organic net sales trends will steadily improve from the first quarter to the second and improve again in the back half. We estimate we will deliver cost of goods sold HMM savings of approximately $390 million, which will more than offset input cost inflation of 3%. And we will generate $700 million of savings for our previously announced projects of roughly $160 million above fiscal ‘17 levels. Turning on Slide 21 you can see a summary of our fiscal 2018 guidance. We expect organic net sales to decline between 1% and 2%. We plan to increase media investment for the year. We project total segment operating profits to be in the range between flat and up 1% on a constant currency basis. As Jeff mentioned upfront, we plan to expand our adjusted operating profit margin in fiscal ‘18. We expect both interest expense and our adjusted tax rate to be in line with fiscal ‘17 levels. We are targeting a net reduction of 1% to 2% in average diluted shares outstanding. We expect full year adjusted diluted earnings per share to be up between 1% and 2% in constant currency with EPS down in the first half reflecting lower sales and the phasing of our cost savings initiatives and brand investments. EPS will be up in the second half as sales trends improve. We estimate foreign currency will be $0.01 headwind to full year adjusted diluted EPS in 2018. And finally as I mentioned earlier, we are targeting to convert more than 95% of our adjusted after tax earnings to free cash flow this year. Now, I will turn over to Jeff to provide more color on our fiscal ‘18 plans.

Thanks Don. As we enter fiscal ’18, it is critical that we improve our top line performance across our businesses, but specially here in the U.S. We began to see some improvement in our U.S. retail sales trends in the fourth quarter of fiscal ‘17. While our yogurt declines continued in the quarter as we expected we saw about a 1.5 point improvement in retail sales trends on the remainder of our businesses. With the best results in May driven by strong merchandising execution and lower price gaps. And we expect to drive further improvement over the course of fiscal 2018. As we shift our focus to 2018, we remain committed to our Consumer First strategy and our growth and foundation segmentation, but we now we need to make some executional changes to improve our top line performance. For example, we are leveraging our new global organization structure to make global prioritization decisions on our biggest growth platforms such as Häagen-Dazs ice cream, snack bars and natural and organic. We are investing in our brands with increased media spending and a higher level or new product innovation. And we will be in the zone on promotions and merchandising on key seasonal businesses like soup and refrigerated dough. And we will leverage our capabilities to win with growing channels and customers in the U.S. and around the world. As I mentioned our new global structure is allowing us to make global prioritization decisions. For fiscal 2018 we have identified four global priorities that are most critical to improve our top line growth trends. First, we plan to grow our global cereal platform including CPW behind compelling product news, innovation and advertising investment. Second, we expect to improve our U.S. yogurt performance through fundamental innovation. Third, we will invest to drive differential growth across several global platforms where we have good top line momentum already. And fourth, we will manage our foundation brands with appropriate levels of investment. Now, let me walk you through each of these priorities in a little more detail to give you better picture of our plans for fiscal 2018. There are four pieces to our global cereal platform. In fiscal ‘17, we grew net sales for cereal partners worldwide and our Convenience stores and Foodservice business. And we grew market share for a Canadian cereal business. While our U.S. retail cereal net sales were down 3%, our focus in fiscal ‘18 is to improve our U.S. retail performance while continuing to grow in the other three areas. We will do that by investing behind wellness and taste news which are two trends driving growth in the cereal globally. Our U.S. Cereal portfolio is advantaged when it comes to wellness. Our entire line has whole grain as the number one ingredient. We removed artificial flavors and colors from almost every product. And we have the largest gluten-free portfolio in the category. In fiscal ‘18, we are going to leverage our wellness advantage by investing behind a new campaign across the Big G franchise called Good, starts with G. We are using TV and digital media to highlight our great taste from real ingredients, our whole grain, our fiber content and our large gluten-free portfolio. For the digital component, we are using precision targeting to tailor our messages to individual consumers with an emphasis on Hispanic families and empty nesters. Wellness news was the key driver of CPW’s growth last year. This year, we are increasing our media investment in wellness campaigns like whole grain number one, which is helping raising awareness of our cereals wholesome ingredients in markets around the world. We are also investing behind Cheerios campaigns that highlight the good ingredients we use, the wellness benefits consumers receive and the causes they support by buying our products. In the U.S., that includes our most recent Cheerios campaign called Good Goes Round. And in Canada, we will continue to support our effort to bring back the Bs. Wellness news is also working on our Foodservice cereal business, with net sales up mid single-digits last year driven by our K-12 schools and college and universities. We will leverage our gluten-free news and our market leading granola portfolio to drive further growth in these channels in fiscal 2018. It’s also important to note that great taste is also helping to drive growth in cereal. So, in fiscal ‘18, we will invest behind taste news across our U.S. and international brands. For an instance, on Lucky Charms, taste news is all about the marshmallows. We drove 3% retail sales growth on Lucky Charms in the U.S. this past year and we have an even stronger plan for fiscal ‘18 with four quarters of marshmallow news. In our first quarter promotion, we are offering a limited number of lucky consumers, a chance to win Lucky Charms’ Holy Grail, a box of Lucky Charms with only marshmallows. Sadly, General Mills’ employees are not eligible to win. The popularity of Reese’s Puffs continued in fiscal ‘17 delivering 7% retail sales growth in the U.S. Reese’s Puffs’ consumers love chocolate and peanut butter flavor and really love the connection to their favorite sweet snack. So, we are investing in consumer messaging in 2018 to tap into that Reese’s brand love. Cinnamon Toast Crunch has delivered 6% compound retail sales growth over the past 3 years. So, we are going to build on the success with a significant expansion of our Toast Crunch portfolio. We are introducing three new flavors, strawberry, blueberry and apple cinnamon that deliver exceptional taste and will invest in TV and digital advertising, coupons and in-store merchandising to generate awareness for the expanded franchise. And finally, our taste cereals and CPW are also driving growth. And we will look to extend that success in fiscal ‘18. For example, we will expand our recent launch of Lion Wild into new geographies and channels. So by investing in our wellness and taste news and increasing our level of new product innovation, we believe that we can generate growth for our global cereal portfolio in fiscal 2018. We continue to believe that U.S. yogurt is an attractive growth category, with per capita consumption still well below levels in Western Europe and Canada. We help build the category over the last four decades by bringing fundamental innovation that introduced new benefits and expanded yogurt’s consumer base. For instance, we developed blended yogurts that improved the taste profile of the category. We led the development of the light segment with Yoplait Light, targeted toward weight managers and we led the kids segment by creating yogurt in a tube. But we were late to respond as Greek yogurt developed early in this decade and our sales have suffered as a result. It is clear that our path to returning our U.S. yogurt unit to growth is to get back to leading fundamental innovation that helps build new segments and bring new consumers to the category. So, let me introduce to you, We by Yoplait. This is a new style of yogurt to the U.S. market and has its roots in our French heritage. We use the traditional French recipe with whole milk and real fruit and flavors carefully cultured in glass jars over an 8-hour period. The resulting product is delicate and smooth and satisfies consumers’ growing interest in yogurts that deliver remarkable taste with just a few simple ingredients. We have created a full line of 8 delicious flavors and we are leveraging our scale to deliver our product at a price point that is premium, but affordable. We are supporting this launch with a full surround of TV and digital advertising as well as in-store sampling. We by Yoplait will lead the development of an emerging yogurt segment, which we call, Simply Better. This is an important step in improving our U.S. yogurt performance, reshaping our portfolio and helping the category return to growth. These products are beginning shipping this week. So, look for them soon in your local stores. In addition to building new yogurt segments, we are expanding our portfolio into fast growing emerging segments in the category. One of these is organic yogurts. We have entered the segment last year with Annie’s and Liberté. These products are performing well on shelf and we are focusing on continuing to build distribution in 2018. And we will expand our portfolio with innovation on Annie’s in the back half of the year. We also see an opportunity to drive growth with yogurt products that target snacking occasion. This year, we are expanding our yogurt snacking portfolio by launching 6 flavors of Yoplait mix sense, which bring a fun snacking option to the taste-oriented consumer who loves traditional Yoplait yogurt. We are excited about these initiatives, but they will only represent a portion of the news and innovation pipeline that we have developed for U.S. yogurt. We will talk more about some more initiatives at Investor Day and throughout the year. Our third global priority centers on four global platforms, where we see differential growth opportunities. They are Häagen-Dazs ice cream, snack bars, primarily under Nature Valley, Fiber 1 and Larabar brands, Old El Paso Mexican foods and our platform of natural and organic brands in North America. Collectively, these platforms represent roughly $4 billion in net sales and we see great prospects for growth for fiscal ‘18. On Häagen-Dazs, we have a leading super premium brand in the large and fast growing global ice cream category and we have excellent manufacturing and distribution scale. We see considerable opportunity for Häagen-Dazs to grow penetration through new occasions, to expand existing product line through innovation, and to enter into new geographies. The impulse segment is the largest and one of the fastest growing segments in the ice cream category and we have just recently entered with our line of stick bars. Their performance helped drive double-digit retail sales growth in Europe last year. In fiscal ‘18, we have planned to aggressively expand stick bar distribution around the world and we have launched new many stick bars to continue our growth. We also continue to innovate in our core cup and pint lines. We are rolling out of the host of new products this year like mini cups in the UK and fruit and flower flavors in Asia. And we have incremental growth opportunities for Häagen-Dazs through geographic expansion. Last year, we launched the brand in Australia, one of the highest ice cream consumption markets in the world. It’s off to a great start and we will continue to expand the brand’s awareness and distribution presence in fiscal ‘18. Turning to snack bars, we see tremendous opportunities for growth on our brands both in the U.S. and internationally. In fiscal ‘18 we are increasing our innovation levels on Natural Valley and U.S. retail outlets, with plans to launch more than 20 new items. We are getting behind coconut, one of the fastest growing flavors in snack bars with their launch of toasted coconut sweet and salty nut bars and coconut butter Nature Valley biscuit sandwiches. We also recently brought Nature Valley granola cups to Convenience stores and Foodservice channels and they are off to a great start. And we are supporting all of this activity with a double-digit increase and media on the brand. We are also extending our long track record of growth on Larabar. We are launching a crunchy line of Larabar nut and seed bars and we are also bringing news to the highly incremental Larabar Bites line with two new flavors caramel sea salt and Chocolate Hazelnut. We are increasing our Larabar consumer investment double digits and we are targeting a 30% increase in distribution this year. The snack bar categories in Europe and Australia is also large, still pursuing the same innovation led strategy in Europe that made us market leaders in the U.S. Innovation on Fiber 1 and renovation on our Nature Valley protein lines drove strong double digit retail sales growth on snack bars in Europe this year. This year we are borrowing another highly successful U.S. innovation by launching Nature Valley nut butter biscuits, which will hit shelves in the UK this fall. Retail sales for Old El Paso grew in the U.S., Canada and Europe last year driven by great innovation and marketing that highlights the brand’s convenience, taste and connection to fresh ingredients. Our Stand 'N Stuff innovation has led growth for the brand and we are continuing to innovate on this platform finding new ways to create new eating occasions. We launched Stand 'N Stuff minis in Europe last year to help consumers to create taco advertisers and this year we are introducing Stand 'N Stuff mini kits to help consumers to create taco tastings with a variety of sauces and ingredients included on the kits. We are also supporting the brand around the world with strong levels of media. Our net sales for our North America natural and organic portfolio including our fast growing Liberté brand in Canada have already reached more than $1 billion and there is still room to grow. For example, Annie’s, our largest natural and organic brand grew penetration almost 60% last year, entered four new categories nationally and grew distribution by double digits yet at only 16% household penetration, significant upside remains. We have a broad set of plans in fiscal ‘18 across our natural and organic platform. I already mentioned our plans on Larabar and our U.S. yogurt brands. On Annie’s we are growing in snacks including our recent entry into ready to eat popcorn and we will continue this rollout in fiscal ’18. In Canada, we are launching Liberté Crunch which combines crunchy inclusions with Liberté’s market leading Greek yogurts. Net sales for our Epic Provisions brand of natural meat snacks doubled last year. We have recently launched jerky sticks and expanded into salty snacks and we are continuing to grow distribution for this on trend brand. In total, we are excited about these differential growth platforms and our segments have put sufficient resources behind them to accelerate their growth in fiscal 2018. Our fourth priority is managing our foundation brands with appropriate levels of investment. We missed the mark last year on our promotional spending on soup and refrigerated dough. So in fiscal ‘18 is to be – our goal is to be in the zone on pricing during the key season. We are not looking to win on price and we won’t go back to the levels of investment from 2 years ago. But we know we need to be more competitive this year. In addition, we are continuing to invest in targeted consumer news where we see strong returns. This fall we are launching a line of organic soups under the Progresso brand, combining our organic expertise with Progresso’s top soup flavors. And we are taking refrigerated dough out of the can with two new varieties of Pillsbury pizza dough. In addition to our four global growth priorities, I mentioned that we are investing in capabilities and focused on winning with growing channels and customers in 2018. One example of this is e-commerce. We have a strong e-commerce team who has invested in tools and capabilities and secured strategic partnerships with leading e-commerce retailers. As a result our e-commerce sales grew 62% in the U.S. last year, 32% globally and our market shares online over indexed versus our market shares in bricks-and-mortar. Shawn O'Grady will provide more details on our e-commerce capabilities globally at our Investor Day in two weeks. So let me close today’s remarks by summarizing our key messages. Fiscal ‘17 was a challenging year, but we finished the fourth quarter in line with our expectations with organic net sales improvement in three of our four operating segments. In fiscal ‘18 we are investing in our brands and capabilities to significantly improve our top line growth trends. We are moderating the pace of margin expansion as we focus on top line improvement. And we remain committed to our Consumer First strategy and our shareholder return model which balances sales growth and margin expansion with a disciplined focus on cash. With that we will open up the call for questions. Operator, can you please get us started.

Thank you. [Operator Instructions] Our first question comes from the line of Andrew Lazar with Barclays. Please proceed.

Good morning everybody and congratulations again Ken.

Hi. Thank Andrew.

Two quick questions for me if I could, I guess first off, I want to go back to the outlook for ‘18, I think you discussed not assuming category trends that will differ much or will be similar to what you saw in fiscal ‘17 and – so I am trying to get a sense if that’s based on just a follow-up process that that’s where trends are now and I guess I am getting at is there an understanding by let’s say General Mills or even the industry as a whole of maybe what’s cause this more significant down shift in the industry category trends through the beginning of this calendar year or is that expectation now based on a more let’s say data based understanding of, this is really the underlying rate of where category growth is going to be for the foreseeable future, maybe the first one?

So Andrew what I will say is that our assumptions for category growth are based on our projections as we look forward and wanting to make sure that we are reasonable on our assumptions as we look for our growth in fiscal ‘18. And our 200 basis point to 300 basis point improvement in our sales trends is really on trying to hit on being more competitive in the categories that we are in and not expecting our categories to improve dramatically, so it really is a reflection of our belief that we need to get back to competitiveness in the markets where we are in. But it’s not predicated on markets improving dramatically and we just wanted to make sure that we were sufficiently conservative I suppose on our estimates on that and clear that our main focus really is to get back to competitiveness in the markets where we are in.

Okay. Thanks for that. And the FY ‘18 organic sales guidance seems prudent given the year we are coming off of, I guess we have had some questions about whether in 2018 whether that’s the year perhaps may be to promise less in the way of actual earnings growth given the need for more reinvestment what’s expected to be somewhat of a back half loaded year from an earnings growth standpoint and still likely negative volume leverage on the P&L, so perhaps you can just talk us through a little bit more of your thinking along these lines and sort of what bridges to the EPS growth given and I think you also have if I am not mistaken like $40 million incentive comp headwind as well that you may have mentioned on the last quarter, so I am just trying to get sense if all that comes together and gives you the comfort that you can do you need to do to get back to top line growth even in the context of delivering some earnings growth?

Let me take the first part of the question and talk a little bit about top line growth and how that relates to earnings and then I will turn it over to Don to talk about how that reflects back to EPS. But on the top line growth, we feel good about our ability to generate the top line growth we have suggested. And it’s really based on a few key elements that I touched on. One is certainly that our media expense is going to grow this year where it was down double digits last year. And our new product innovation is going to be higher and we are going to be in the zone on pricing for some key brands. I would also say that we weren’t very pleased with our execution this past year and we are highly confident that we are going to be to execute well this year, because we had our plans set later in the year. So on the top line, we are convinced that we can deliver the 200 basis points to 300 basis points improvement that we see. Having said that to the extent that, we find opportunities that have a high return as the year unfolds, we will certainly be glad to reinvest and to continue to try to grow our top line further than that if we see that there are good opportunities to deliver a good return. On the operating profit side I mean top line certainly is our top goal, but we are also committed to continuing to deliver margin expansion and the plan that we laid out reflects that. And we have got very good HMM as we have for the past decade and we have some other sources of cost efficiency which you see coming through. So we are remaining disciplined on the cost side and making sure that we have enough media and trade and innovation support to improve the business that we would look at. How that translates into EPS, I will let Don take that from there.

Yes. So, Andrew, as we have talked about in the call, there is several things contributing to profit improvement next year, HMM at $390 million will exceed our inflation, even though inflation will be elevated in F ‘18 versus F ‘17 and 3%. And we have another $160 million in cost savings – incremental cost savings coming through. In addition, while our price mix will be less of a contributor in ‘18 than in ‘17 it will still be a positive contributor. So, we have those three positives. It will be offset by volume declines still in the year and that will be particularly felt in the early part of the year. In Q1, for example, we expect our organic sales to closely near what we saw in ‘17, for example. And then we will see investments. An investment will span a number of areas. We have talked about media being up and that will certainly be one. But we are also investing in things like taking Yoplait to more cities in China to expanding our Häagen-Dazs stick bar business, geographic expansion in Europe, building capabilities like e-commerce and SRM and getting started on our process transformation work. And these will show up – they won’t all show up in media and I want to make that clear, while media will be up, many of these investments will be seen in COGS or in SG&A, but that will be – that is embedded in the guidance. And then as you mentioned, incentive, which I think next year is going to be about $45 million to $50 million drag. So, the combination of those things allows us to be comfortable with the flat to plus 1 SOP. The EPS will expand a bit more, because it will benefit from the share reduction of 1% or 2%. And that’s really the biggest driver between SOP growth and EPS growth next year.

Great. Thanks, everybody. See you in New York.

Thanks, Andrew.

Thank you. Our next question comes from the line of Ken Goldman with JPMorgan. Please proceed.

Hi, good morning and Ken, best wishes from me as well.

Thanks.

Question I guess for both you and Jeff, initially, one of the reasons behind driving cost savings was to generate fuel that would be reinvested in the business and push revenues even higher sort of generating that virtuous cycle. So, in a way this is a sort of symbiotic to pursue sales growth and margin expansion at the same time. And I think it’s still the case, but the way you are talking about these goals now, where the company needs to balance the effort to grow margin versus growing sales. That’s slightly different, right. It almost implies that the goals are somewhat mutually exclusive in a sense. So, I am just curious am I reading that right? Has something changed? And if so, why is it harder for the company than it thought to drive this virtuous cycle with cost savings really sparking investments in driving that top line? It’s a little bit different wording from you guys than what it used to be. I am just trying to sort of figure it out a little bit.

Yes, Ken, this is Jeff. So, thanks for the question. What I would say is that on the – we are still dedicated to both growth on the top line and becoming more efficient and we do not think I am usually exclusive. So, this coming year, I mean, our intent is to grow our top line by 200 to 300 basis points, whilst continuing to still grow our margins. So, I want to be clear to everyone that we still intend to do that. What you see is that when we talk about the muted margin growth, it really is a reflection primarily of pricing and the pricing that we were hoping to get this past year, but in this current environment, it’s really challenging. And so as we look at our cost savings initiatives, whether they are HMM or other initiatives, we feel great about those and great about our ability to deliver those. The thing that has really changed from a year ago is that we are anticipating that we can generate more pricing in the current environment. And that pricing has certainly deteriorated over the past year and the pricing environment was not what we anticipated. And so what you hear from us really is that, our strategy is basically the same. We don’t think that there is a dichotomy between choosing growth over our margins, but that our ability to take pricing has impacted our ability to generate the margins we had originally anticipated. We are still proud of the margin growth we have generated over the past few years, 200 basis points of margin growth and we will continue that margin growth journey, but that’s really the big difference. And we also know I suppose that really getting back to supporting our brands the way we need to is going to be important to our top line growth to create the virtuous cycle that we are looking for.

Thank you. That is helpful. And then quick follow-up from me and I know you touched on this a little bit, but just to get a little more color, your sales in North America retail this past quarter, they were meaningfully higher than what the scanner data would have suggested. Can you just walk us through again some of the drivers of that gap? Again, I know it’s not exact, but just helping us out directionally would be appreciated.

Yes. Look, I appreciate you asked that question. I am guessing that there are others on the line probably have the same one. So, we saw about a 3 point gap in our sales between our movement and our RNS in North America here in the last quarter. And the most important thing I want to leave you with is that only about 10% of that gap is shipments ahead of consumption. And of that, that was primarily cereal for June merchandising. And we ended the year in 2017 about the same place we did the prior year. So, there is not a big inventory build up would then brings the question, okay, then what’s the rest of the 90%? And about 40% of that is growth in non-measured channels that are not contained in Nielsen and we have seen an acceleration in growth. I have told you we feel good about our e-commerce business and certainly we are growing well there. And so our growth in unmeasured channels has increased to about 100 to 150 basis point gap between what we had seen before. So, that’s about 40% of the difference that you see. And the other 50% is not so intuitive, but it’s really important than that. The pounds gap was only about 1.5 points and that’s because the price mix in Nielsen is different than what we see in our business. And probably that is due to some margin compression on the part of retailers and so as they compete in the marketplace. And so it is not so intuitive, but I guess it’s important to note. So, on the pound basis, that really covers the other 50%.

Great. That’s very helpful. Thanks so much.

Thank you. Our next question comes from the line of David Driscoll with Citi. Please proceed.

Great. Thank you. Good morning. And Ken, I would like to wish you all the best and congratulations on retirement.

Thanks a lot.

Okay. So want to just get into little bit of follow-ups from I think what Andrew was asking about, but I want to take it in a slightly different direction. When you think about the fiscal ‘17 organic revenue and volume declines of negative 4% and negative 7% respectively, how much of this is self-inflicted, if I can use that phrase versus broader industry trends? And I see like that’s still not entirely clear. You made many statements about the execution wasn’t what you want, but I am trying to get a sense here of, do you think half of the problems that have happened on the top line are something that were generated internally by decisions the company made? And a follow-up if I may.

Look, I’d say David it’s a good question. Look, I think that certainly more than half of the businesses we saw were due to the decisions that we made in the execution that we saw. And you see that primarily in our soup and refrigerated dough businesses and how much market share we lost this past year whereas in the year before we actually gained share in both of those categories. And it’s really hard for innovation and other ideas to work when your pricing it so off. And I would say that the reductions we made in spending in yogurt, which we had anticipated were certainly part of the challenge as well. The part that was not necessarily self-inflicted, but we are going to have work to correct this next year was our innovation in yogurt, we know we have needed to improve. And so as we look at this past year, certainly more than 50% of our challenges were things that we think are entirely fixable. In fact, we think the vast majority are entirely fixable this year to make us more competitive. And the environment itself, yes, it was a little more challenging at F ‘17 than the years before. It’s about 1.5 points less than it was in the year before in terms of the market and we are expecting the F ‘18 category to be about the same as F ‘17 but honestly we think the vast majority of our challenges are correctible both in the U.S. and other places as well.

Well, I think that’s really good to hear. And my follow-up would just simply be then when we look at the guidance and its negative revenue growth on top of the negative revenue growth, the self-inflicted items would seemingly be things that would turn into, I thought as people don’t like this phrase, but easy comps. And then just the ability to see a rebound in some of these categories, because we feel like that’s in the forecast, would you agree with the idea that you are – last year it didn’t go so well, so you need to set out a forecast here that’s extremely reasonable and gives you cushion here kind of day one, is that I don’t know how you would like to phrase it, but from the outside perspective, we are trying to judge the degree of difficulty of hitting the forecast you laid out today? Thank you.

Well, the – a couple of things I mean certainly our comps are easier especially in the second and third quarter. But we actually don’t allow that as a reason to get back to growth here in the building here at Minneapolis, so well it may be true. What we are focus on are the fundamental actions we are going to take. And Jon Nudi and his team have done a great job putting together a plan that we are highly confident in. And in terms of the have we set a mark we can hit, yes we have given guidance that we are confident that we can hit. And looking to the extent that we can exceed it, we will certainly try to exceed it. But what we don’t want to do is try to jump out of our shoes with outrageous category expectations from the beginning. We would rather [ph] make sure that we have category assumptions and growth assumptions that are reasonable and build on those. And that’s what we have done in this plan both on the earnings side and on the growth side.

And the other thing that I would add David is that there is momentum we have take into consideration and as you saw F ‘17 unfold, we saw some negative momentum in Q2 and Q3, we began turning that in Q4, but it doesn’t turn overnight and so we will continue to see that momentum improve as year unfolds that’s why I indicated earlier Q1 we don’t expect to see a lot better performance than in Q4, but we expect Q2 to be better and the second half to be better still. So our expectation is that we exit F ‘18 on much better footing than we are today and certainly that will help us get to that guidance.

That’s good color. Thank you, guys.

Thank you. Our next question comes from the line of Jason English with Goldman Sachs. Please proceed.

Hey, good morning folks. Thanks for squeezing me in. And let me echo the sentiment to Ken. Ken, congratulations, best wishes.

Thanks Jason. Thank you.

Yes. It sounds like you are just going to be out golfing everyday you still got your hands fold for sure.

Maybe every other day.

That’s okay. Yes, I will take that. I am jealous. Alright, back to the issues at hand, you mentioned sort of the current pricing environment and obviously there has been a lot of consternation around that of late with some of the pressure we are seeing on private label, some of the pressure we are seeing with retail margins, etcetera, but contrast with your results, I mean the pricing that you have achieved in North America is frankly impressive in this environment, can you unpack that a bit for us how much was mix and how much was real pricing and how much was trade and give us little more context in terms of what you are seeing and what you expect on the forward?

Jason, I appreciate the positive comments on our pricing as we said we got a little ahead of ourselves in some cases and hurt on the volume side. But we are pleased that we need to get the pricing in place it was an important contributor this year being ‘17. I won’t bring up precisely the price and mix, but one other things that you see in the pricing is that as we did less merchandising and we had more base line it was a positive mix from that standpoint and it’s also positive mix from a product and category standpoint that helped as the year unfolded. Looking forward, we still expect to see price mix benefit in F ‘17 – it’s F ‘18. Thank you, Jeff. As I said for the total company it would be less than in ‘17 and it’s really driven by North America and we expect it to be positive, but lower and as Jeff alluded to it’s really about getting in the right zone on some key brands and particularly Pillsbury and Progresso. But we expect the other segments actually to be up on price mix in F ‘18. Our Convenience and Foodservice business will see a stronger bakery flour pricing as that recovers, we are going to be pricing for some higher inflation which includes the Brexit impact in the UK and higher dairy inflation and obviously in Asia and Lat-Am have a lot of the emerging market inflation that comes through us in pricing. So we expect price mix to still be a contributor in ‘18 albeit at a slightly lower level than we saw in ‘17.

That’s helpful. Thanks. And then one other sort of really high level question and it pertains to you, but it also pertains to the industry at large, because the pattern is pretty pervasive, but speaking to you specifically over the last 5 years or 6 years advertising media spend shrunk by around 30%. Over that same duration your North America retail volume shrunk by nearly 20%, is the relationship there or I guess why shouldn’t we believe there is a relationship there and if we do underwrite to view this relationship, shouldn’t there be a need for the industry at large including yourselves to really pull back a lot more money into really getting back to nurturing the brands here?

Well, Jason that’s a good question. I am not – although I am not going to speak on behalf of the industry, let me talk about us. And of course as I need to make sure that we nurture the brands. And I think that’s a really good point and that’s exactly what we are going to be doing in F‘18 and that’s why our media spending is up a little bit but there is a lot of ways to nurture brands and to grow them. I mean it’s also why we have to have our pricing into the zone, because lot of media spending if your pricing isn’t the right place it doesn’t really work that’s why innovation is going to grow, that’s why we are building capability in e-commerce and strategic revenue management. So I think you are right on the point that we need to make sure that we continue to nurture our brands. Media is one element, but so is getting our pricing right, making sure our innovation is on point, that’s why our Consumer First strategy is important and that’s why we are continuing to build our capabilities especially in e-commerce.

Thanks a lot guys and see you soon.

Okay.

Thank you. Our next question comes from the line of Bryan Spillane with Bank of America/Merrill Lynch. Please proceed.

Hey, good morning everyone.

Good morning.

I guess just two quick – two follow-ups I guess to some of the previous questions and I guess first just to Jason English is question is a question about spending, so the reinvestment in 2018, should we think of that as sort of being base level of spending that you will grow off of in ‘19 and beyond or is it more episodic, you are kind of increasing spending this year, but you will have to maintain those levels going forward?

Bryan, I think you should think about – I think as we think about our investment in you have Jason and I think you are referring to media, but we would say more broadly is we expect our investment behind our brands to go ahead of our sales levels. And you are seeing that in F‘18 and I think it is more or less for ‘19 and ‘20 you should assume the same.

Okay. And then I guess the second just to follow-up I think it was to Ken Goldman’s question – response to Ken Goldman’s question earlier, Jeff you talked about how in that gap to the Nielsen data that 50% of it is maybe retail or margin, why wouldn’t we be concern that doesn’t become an issue maybe for the manufacturers or for General Mills, if there is a need for the retailer to be investing in price I guess or spending more and the retail trends aren’t very good, right, the store traffic isn’t good, why wouldn’t we have to maybe be concerned that there may be a need for more investment at retail?

Well. I can only forecast ahead of what’s going to happen as always – always a tricky business. I mean, for me the retailers’ voice has been competitive. And even if this past quarter, we saw a tick-up in competitive activity. I mean I guess I would always say that you hope for decades, I mean retail grocery industry has been really competitive. And I assume it would be really competitive going forward. And the way that we win is through great brands, well articulated through marketing and great product innovation. And I think that as long as we continue to do that, we will see success maybe we have been doing on Häagen-Dazs and we have seen success. We done on Lucky Charms this year and we saw success. We have done on Old El Paso and we saw success. We have done it on Annie’s and we saw success. So even though it wasn’t the year we wanted and some businesses didn’t work the way we wanted, I will say that we have a number of businesses around the world that met or exceeded expectations. And the similarity among all of them is that we got great brands, we got great products, we invested behind them and we innovated as well, that’s the combination I think as long as we do that then we will like the results we see.

Alright. Thank you.

We are trying for one more question here.

Alright. Thank you our next question comes from the line of Chris Growe with Stifel. Please proceed.

Thank you. Good morning.

Good morning.

I just offer my congratulations to you as well, Ken. Wish you all the best there.

It’s my pleasure.

Sure. Thank you. So just make it quick here, I just had – I wanted to ask and I think we have all kind of asked this in some form, but as you think about the pressure against the consumer this year whether it’s merchandising activity or obviously some increase in media expense, how much of that broadly growing in fiscal ‘18? It’s going to be up as a percentage of sales it sounds like, how much – can you give a little more quantification on how much that could be growing this year?

Well, Chris, I am not going to, I guess, quantify it for you, but again as I listed to Andrew’s question, we have some margin improvement pluses coming through in HMM over inflation in the cost projects and in price mix and even offsetting some of that with volume declines, I mean, there is still a pretty significant gap between that and the earnings expectations we have for the year and that gap is really filled by the investments that we expect to be making.

Okay. And then just from a high level standpoint, there has been a lot of discussion about the Amazon, the Whole Foods potential acquisition and merger and certainly a lot of questions from investors, what they could mean for your companies. I know one of the things you are doing is investing in e-commerce this year. So, not an in-depth question here, but just to understand kind of what that means to you and kind of a preparation of General Mills and kind of where they stand in preparation for an increase in e-commerce sales as that occurs here in the near future?

No, thanks for that question, Chris, I mean, obviously, it’s one that’s on the minds of lot of people these days and has been for us for long time. I think with regard to e-commerce, I think there is couple of key things on a high level to keep in mind. The first is that where we have engaged in e-commerce, whether it’s here in the U.S. Our sales online have broadly outperformed our sales in the store. And so we feel good about our ability to win in e-commerce environment. The second is that if e-commerce is going to be broad across many customers, there is not just going to be one customer, even though that lot of talk about the Amazon and Whole Foods deal, I mean, all of our major customers have e-commerce components. As we have experienced around the world, there are variety of customers who participate in e-commerce and so it’s not going to be just one winner. The third is that we have got great relationship specifically with Amazon and we have got great relationships with Whole Foods. In fact, some people will probably be surprised to know that we are actually vendor of the year for 2 years in a row with Whole Foods and we have our e-commerce growth has been – we have been really pleased with it. And our growth – and our natural and organic are really pleased with it. And so if those are two trends that are going to continue, we feel like we have done our job so far. But look, that’s going to continue to evolve. And though we are satisfied with what we have done so far, we are going to keep evolving as the marketplace evolves. So, we feel like we are pretty well positioned.

The investments you are making say this year that puts you in a position where you are ready to accelerate the growth in e-commerce. So, is this an ongoing sort of related investment for General Mills?

Well, I think that Chris, I think that the growth in e-commerce, especially here in the U.S., but is going to accelerate. And so to the extent that accelerates, then we will accelerate our investment broadly in e-commerce, but really with the growth of the e-commerce business. But we see growth in e-commerce here in the U.S. as really prevalent in China and Korea. I mean, that’s where we see the highest penetration of e-commerce and food and growth. So, we expect that channel to continue to grow.

Okay, thank you.

Great. I know we didn’t get to everyone. So, please I am around all day, give me a ring and happy to answer any additional questions. Thanks so much for your time this morning.

Thank you. Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.