Aaron Broholm - VP, Investor Relations Mark Smucker - President and Chief Executive Officer Mark Belgya - Vice Chair and Chief Financial Officer Steven Oakland - Vice Chair and President, U.S. Food and Beverage Barry Dunaway - President, Pet Food and Pet Snacks

David Driscoll - Citigroup Andrew Lazar - Barclays Capital Ken Goldman - J.P. Morgan Christopher Growe - Stifel Nicolaus Mario Contreras - Deutsche Bank Alexia Howard - AB Bernstein Robert Moskow - Credit Suisse Jason English - Goldman Sachs John Baumgartner - Wells Fargo Securities, LLC Farha Aslam - Stephens Inc. Aatish Shah - Susquehanna Financial Group, LLLP Akshay Jagdale - Jefferies Matthew Grainger - Morgan Stanley Jon Andersen - William Blair & Company

Good morning and welcome to the J. M. Smucker Company’s fiscal 2017 second quarter earnings conference. This conference is being recorded an all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers after the presentation. Please limit yourself to two initial questions during the Q&A session and re-queue if you then have additional questions. I will now turn the conference call over Aaron Broholm, Vice President, Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us for our second quarter earnings conference call. With me today and presenting our prepared comments are Mark Smucker, Chief Executive Officer, and Mark Belgya, Vice Chair and Chief Financial Officer. Also, joining us for the Q&A portion of the call are Steven Oakland, Vice Chair and President, U.S. Food and Beverage, and Barry Dunaway, President, Pet Food and Pet Snacks. During this call, we will make forward-looking statements that reflect the company's current expectations about future plans and performance. These statements rely on a number of assumptions and estimates and actual results may differ materially due to risks and uncertainties. I encourage you to read the full disclosure concerning forward-looking looking statements in this morning’s press release, which is located on our corporate website at jmsmucker.com. Additionally, please note the company uses non-GAAP results for the purposes of evaluating performance internally as detailed in the press release. We have also posted to our website a supplementary slide deck summarizing our second quarter results, which can be accessed through the link to the webcast of this call. These slides and a replay of this call will be archived on our website. If you have any questions after today's call, please contact me. I will now turn the call over to Mark Smucker.

Thank you, Aaron. Good morning, everyone, and thank you for joining us. This continues to be an exciting and dynamic time at Smucker as we're delivering on both our current-year priorities and our long-term goals. This includes another quarter of record adjusted earnings per share as we continue to achieve our targets for synergies and cost savings. Second quarter results also benefited from the strong performance of the Uncrustables, Dunkin' Donuts, Cafe Bustelo, and Smucker's brands, along with contributions from innovation as new products introduced in the past three years contributed 9% of our net sales in the quarter. In addition, we are investing in new capabilities to support the growth of our brands in on-trend platforms. We're making good progress on our journey to enhance innovation, e-commerce, our go-to-market skill set, and revenue management capabilities. One of the key initiatives that we are thrilled to share this morning is the decision to launch our Nature's Recipe premium pet food brand into the mainstream grocery and mass channels, which I will discuss in a moment. All of these efforts will position us to meet our long-term objectives for top and bottom line growth and deliver against our consumer-centric vision to engage, delight and inspire our consumers. With that background, let me provide a brief overview of our second quarter results. Excluding the impact of divestitures and foreign-exchange, net sales decreased 5% compared to 2016. This included a 2% impact from lower pricing, primarily reflecting a list price decline in coffee taken earlier in the fiscal year. Lower pet food and peanut butter sales also contributed. With the anticipated impact of commodity inflation in certain categories and contributions from the launch of Nature's Recipe, we continue to project full year net sales to be in the range of flat to down 1% compared with 2016. For the second quarter, adjusted operating income was in line with the prior year as the decrease in net sales was more than offset by lower input costs and incremental synergies. Aided by a lower tax rate and a decrease in shares, adjusted earnings per share grew 7% to $2.05, exceeding our previous estimate for the quarter. This was mostly attributable to higher-than-planned segment profit for pet food and a continued focus on controlling administrative expenses. For pets, the over-delivery reflected a decision to reallocate a portion of our planned second quarter marketing spend to the fourth quarter to support the Nature's Recipe launch. For the full year, we remain on track to achieve our previously stated guidance for adjusted earnings per share. As I turn to the US retail segments, I would highlight that in each of our businesses, not only do we compete in every segment of each category, but are strategically focused on those segments where we can achieve the most long-term growth. Beginning with coffee, profit was up 3% over the prior year, despite the anticipated topline impact of price declines. In terms of the brands, volume for Folgers roasted ground coffee decreased 5%, reflecting a decline in our opening price point value offerings. However, Folgers K-Cup volume increased in the quarter, responding favorably to planned price investments. For the Dunkin' Donuts brand, bagged coffee volume was up 6% as lower prices supported by favorable input costs have improved the competitive position of the brand. In addition, Dunkin’ K-Cups achieved double-digit volume growth in the quarter, including contributions from new varieties. And the brand continues to gain market share in the one cup segment. Our Cafe Bustelo brand also realized double-digit growth in the second quarter for both its roast and ground, and K-Cup offerings and we anticipate this trend to carry into the back half of the year. Turning briefly to the green coffee market, both Arabica and Robusta futures increased further lately. However, we continue to recognize lower green coffee costs in the second quarter. While we do not disclose our hedged positions, we remain confident in our ability to adjust pricing when warranted by our recognized costs as we have managed pricing in the past during periods of significantly higher green coffee markets. Within our consumer food segment, the second quarter performance of peanut butter was weaker than last year, with a high-single-digit volume decline for the Jif brand. This was partially attributable to the timing of shipments as consumption and market share trends remain comparable to the prior year. With upcoming merchandising support and additional marketing investments, we anticipate peanut butter sales to improve in the back half of the year. The Smucker's brand delivered solid performance in the second quarter. As expected, volume rebounded in the quarter for Uncrustables frozen sandwiches following a softer first quarter which was related to timing of customer shipments. Volume was up 13% in the second quarter and year-to-date Uncrustables volume is now up 6% in our retail business. We expect double-digit growth for the full year. In addition, our snacking platform continues to gain traction beyond Uncrustables as Sahale Snacks and Jif bars also delivered sales growth in the quarter and gained new points of distribution. Lastly, as it relates to the Pillsbury brand, aggressive competitive activities continued to influence the overall baking category and impact topline performance, trends we expect to continue as we proceed through the fall bake period. However, Pillsbury and all our bake-off brands remain key contributors to overall segment profit, which we also expect to continue. Turning to the pet food segment, we are excited to share our plans to offer premium dog food in grocery and mass outlets through the introduction of the Nature's Recipe brand in these channels. Nature's Recipe premium pet food has a long history participating in the pet specialty channel and is uniquely positioned to meet the consumers’ increasing desire for natural and wellness offerings at accessible price points. This launch allows us to participate in the fast-growing premium segment within traditional grocery outlets and leverage our scale in these channels. Retailer response to the introduction has been very enthusiastic and our teams are doing a fantastic job executing our launch plans. Initial shipments should occur near the beginning of the fourth quarter, supported by strong marketing and merchandising efforts. We expect this launch will complement our actions to stabilize the Kibbles 'n Bits brand and will benefit our entire dog food portfolio, providing a strong presence in each segment of the mainstream dog food category. Looking at the rest of the pet food business, topline performance from Meow Mix cat food was soft in the second quarter as anticipated. As we transition out underperforming SKUs, we are content about driving future growth with new on-trend offerings, such as our latest innovation Meow Mix Bistro, along with investments in TV advertising and pricing support. Sales for Pet snacks were down mid-single-digits in the quarter against the strong prior year comp. For the Milk-Bone brand, sales were down low-single-digits, with a portion of the decline being timing related, reflecting a shift in the promotional calendar. For the rest of the snacks portfolio, the exit of certain private label businesses and the impact of competitive activities, particularly on our Milo's Kitchen brand also contributed. With future innovation underway in an upcoming packet redesign, we anticipate growth of Milo's Kitchen over the long-term as protein-based snacks increase in popularity. Within premium pet food, sales for the Natural Balance brand were down slightly in the quarter, reflecting the recent slowdown in the overall pet superstore channel. However, we project a stronger back half of the year for Natural Balance, supported by the ongoing national advertising campaign. Finally, our synergy and cost savings activities remain on track as our diligence around cost management and a continuous improvement mindset is greater than ever. In the second quarter, we realized $29 million of incremental synergies bringing our year-to-date total to approximately $60 million. We continue to anticipate $100 million of incremental synergies for the full fiscal year, with the potential for some upside to this estimate. Including the $37 million realized in fiscal 2016, this would bring our total to nearly $140 million of the $200 million anticipated by the end of fiscal 2018. In addition, we continue to target $50 million of additional annual cost savings to be realized over the next few years related to our previously announced organizational redesign program and plant closures. As we have indicated, we expect to initially invest much of these incremental savings in several identified areas that I mentioned earlier that will ultimately support topline growth. In closing, I would like to thank our employees for their continued efforts towards delivering results in our core business, building on our product innovation activities and marketing support, expanding our capabilities to enhance future growth, and achieving our synergy and cost savings goals. This strong execution continues to position the company well for the remainder of this fiscal year and the longer-term. I will now turn the call over to Mark Belgya.

Thank you, Mark. And good morning, everyone. I will begin by providing additional color on our second quarter results and then conclude with our outlook for the full year. Net sales decreased by $164 million or 8% in the quarter. The prior year's divestiture of the canned milk business detracted 3 percentage points as did volume mix, which was driven by pet food, coffee and peanut butter. Lower net price realization had a 2% impact and was mostly attributable to coffee. The impact of foreign exchange was immaterial. GAAP earnings per share were $1.52 this quarter, 3% above the prior year. Factoring in non-GAAP adjustments for unallocated derivative gains and losses, amortization expense and special project costs, which are all summarized in this morning's press release, adjusted EPS was $2.05, an increase of 7%. Adjusted gross profit declined at a significantly slower rate than sales, resulting in 190 basis point improvement in gross margin to 39.6%. Year-over-year gross margin expansion was realized in all three US retail segments, most significantly for coffee. Overall commodity costs were lower in the quarter, driven by green coffee and offset the impact of lower net pricing. Reduced manufacturing overhead costs and incremental synergies contributed to gross margin growth. SD&A decreased $27 million in the second quarter or 7% compared to 2016, mostly attributable to incremental synergies. Excluding the benefits of synergies, marketing expense increased slightly for the quarter. As Mark indicated, a portion of the marketing spend originally planned for the second quarter is now being shifted to the fourth quarter to support the launch of Nature’s Recipe brand in grocery and mass channels. For the full year, we expect market expense to be up approximately $35 million or 8% across the company. Adjusted operating income for the second quarter was flat with the prior year, while operating margin increased 170 basis points to 20.7%. Below the operating income line, lower interest and income tax expense and a decrease in the number of shares outstanding contributed to the earnings per share growth. We now expect the full year effective tax rate to be consistent with our year-to-date rate of approximately 33% compared to our previous guidance of 33.5%. Let me expand on our segment results. Beginning with coffee, second quarter net sales decreased 6%. Lower net price realization drove five percentage points of this decline, reflecting the full quarter impact of the 6% list price decline taken in May of this year across most of the coffee portfolio. Negative volume mix had a 1% impact in the quarter. Net sales for the Folgers declined 10% with lower net price realization and volume mix contributing somewhat equally. For the Dunkin’ Donuts brand, sales were up 4% as lower pricing was offset by strong volume mix growth for bagged and K-Cup offerings. Lastly, Cafe Bustelo sales were up 20% as the momentum for this brand continues. Coffee segment profit grew 3% compared to the prior year, with segment margin increasing 300 basis points to 33.8%. The net impact of lower pricing as compared to the recognition of lower cost was favorable to segment profit in the quarter and more than offset unfavorable volume mix and a higher marketing expense. Turning to consumer foods, net sales were down 4%, excluding the canned milk divestiture, mostly due to unfavorable volume mix. Looking at the key brands, Jif was down 12%. For nut butters, this reflected lower volumes, partially attributed to the timing of shipments along with lower pricing, while Jif bars continued to have strong growth. Sales for the Smucker's brands were up 4%, driven by the return to double-digit growth for Uncrustables frozen sandwiches. In the bake aisle, sales for Crisco were down slightly as growth in oiled was offset by a decline in shortening and Pillsbury brand sales decreased high-single-digits on lower volume. Consumer food segment profit declined 7% attributable to $12 million of prior-year earnings related to the divested milk business. Excluding this impact, segment profit was up 3% as reduced manufacturing costs offset lower volume mix and net price realization and an increase in marketing. Net sales for our pet food segment decreased 6% primarily reflecting volume mix. Lower sales were driven by high-single-digit declines for our mainstream pet food brand, including Meow Mix and Kibbles 'n Bits. While sales for our largest pet snack brands, Milk-Bone and Pup-Peroni were comparable to a strong performance in the prior-year, a decline for Milo’s Kitchen and the exit of some private label businesses were key drivers of a 6% decrease across our pet snacks portfolio. Sales for our premium Natural Balance brand declined 1%. Pet food segment profit was consistent with the prior year as the sales shortfall was offset by reduced input cost, incremental synergy realization and a slight reduction in marketing for the quarter. Net sales International and Foodservice declined 3% compared to the prior year. Excluding the impact of the canned milk divestiture, net sales were down 1% as favorable volume mix was offset by lower price realization. Segment profit decreased 7% compared with very strong second quarter in the prior-year. Approximately half of this decline was due to lapping $2 million of prior-year profit related to the divested milk business. In addition, the net impact of pricing and costs was unfavorable and only partially offset by favorable volume mix and lower marketing. Turning to cash flow, cash provided by operations was $136 million for the quarter. This compares to $276 million in the prior year, which included benefits related to our working capital initiatives. Factoring in capital expenditures of $34 million, free cash flow was $103 million in the second quarter, bringing the first half total to $291 million. We continue to project full year free cash flow of $1 billion assuming CapEx of $240 million. While this implies a significant acceleration of free cash flow in the back half of the year, this is consistent with our historical trends and our current working capital assumptions. During the second quarter, we paid down an additional $100 million on our term loan and ended the quarter with total debt of $5.35 billion. Based on trailing 12-month EBITDA of nearly $1.6 billion, our leverage currently stands at just under 3.4 times and we continue to target a leverage ratio 3.1 times by the end of this fiscal year. Let me conclude with an update on our full-year sales and earnings outlook, which remain unchanged from our most recent guidance. Excluding the 2-percentage point impact of the divested milk business, we continue to expect net sales to be in the range of flat to down 1% compared to the prior year. This implies a return to organic sales growth for the back half of fiscal 2017, including the anticipated impact of commodity inflation in certain categories, contributions from the launch of Nature’s Recipe and the continued strong growth of Uncrustables in both retail and the food service channel. In addition, we continue to project adjusted earnings per share to be in the range of $7.60 and $7.75, with a bias towards the middle to high-end of this range. While this is unchanged from our previous guidance, there are a few puts and takes reflected in our outlook. Most notably, the benefit from the lower projected tax rate is expected to be offset by incremental investments in support of the Nature’s Recipe launch. In closing, while the challenges to revenue growth persist in certain categories, partially driven by the benefit of favorable commodity costs being passed on to our consumers, we remain pleased with our earnings performance. In addition, we continue to make meaningful progress executing on our key initiatives to improve topline trends moving forward. Overall, we remain confident on our ability to achieve solid financial results this fiscal year and beyond. We thank you for your time and we’ll now open up the call to your questions. Operator, if you would please queue up the first question.

Thank you. [Operator Instructions] Our first question comes from David Driscoll with Citi. Your line is open.

Great. Thank you and good morning.

Good morning.

So, I guess, I’d like to talk a little bit about retail consumer. What's happening here, specifically on volumes, such a mid-single-digit volume decline is still able to generate higher profits with increased marketing? Are you pruning unprofitable volumes? And then, could you just talk about volume expectations for the remaining portion of the year for this segment and the others as well? Thank you.

Hi, David. Steve Oakland. I’ll start and then Mark or Barry can jump in. I think there’s been a lot of work done on our portfolios. And if you think about how we’ve constructed our coffee business and how it’s performing, it’s doing just as it’s been built, right? We have a large profitable mainstream business and that large mainstream business has provided a platform. And I think in Mark’s comments, we talked about 20% growth on Bustelo, our Dunkin’ K-cup business up 12%, our Dunkin bagged business up. So, I think it’s allowed us to really manage the mix game. It’s allowed to manage where we are large and where we can scratch out those segments that are growing. You’ve got to dig into the details. In our coffee business, I think in Mark’s scripted comments, the OPP item is down, our lowest priced item is down, but our mainstream 30.9-ounce classic roast item is up 2%. So there's a lot of work going on within each one of these businesses and we’re able to, by managing mix, bring both margin and the right things in. The same thing in consumer foods. We’ve got Sahale. We had good performance from Sahale in the quarter. The Jif bar snacks, there’s nice mix and margin opportunities within each one of these categories.

David, this is Mark Belgya. Just to add to on the consumer foods which I think might have been a little more focused question, so the other thing that we realized is that we are running – and this is true candidly across our coffee business as well – but from a manufacturing perspective, we’re seeing really good efficiencies. So, that flowed through to earnings this quarter as well, which helped the profitability despite the softer volume.

I’d go back and say, those are all supply chain work. We always talk about these things and supply chain opportunities, they’re starting to drive better results across each one of the food and beverage businesses.

Can you guys just give a little bit of commentary on the volume expectations for the segments going forward? And I think the Street’s just been off on some of the expectations. I’ve been off on some of my volume expectations. And I’d just like to understand how volumes are expected to flow in the segments in the remaining two quarters. Thank you.

This is Mark, David, again. Maybe I’ll start. You guys can jump in. I think that what you’re going to see – because I understand – or I’m guessing just based on some of the early feedback we’ve got from the reports that there’s questioning whether or not we can hit the second half sales. And I think there’s a couple of things I would frame it bigger and, again, you guys can speak to the volume. But we are seeing – expected a little bit of volume growth. But, really, the growth, I think, from topline is going to come through what we said. It’s going to be some of the effect of inflation that will probably come through. It will be the Nature’s Recipe rollout, it will be Uncrustables. But then in some of the other businesses, for example, Jif, I think you’re going to see a turnaround there. We’ve got some target merchandising programs that we’re going to put into place that should address a little bit of what we – the negative we experienced here in Q2. And I think that probably holds true for some of the other categories.

We’ve been in a long period, as you know, of low commodities. We did take our fruit spreads price increase at the end of the quarter. That’s not one that we make a big press release around. But that is in and up across the categories and that’s been recepted well. I think given the fact that we have transparent pricing and we have credibility with the retailer, we took our coffee pricing down when a lot of others didn’t. That gives us the credibility when we have pricing and inflation in our commodities to take those prices back up. So, I think it's fair to assume that there’ll be some of that in the back half.

David, this is Mark Smucker. Just a couple other comments around – just to build on what Mark said. First of all, the Nature’s Recipe piece is important and we do expect a very healthy launch of that product. And then, Steve’s point, of course, around inflation, we already have taken actually a price increase on the Smucker's brand. And then, I would also point to consumption data. As we look at consumption data, on most of our categories, the share loss, if there is one, is very modest. And so, we’re seeing turns remain relatively strong. I would point to peanut butter as an example. We had a very soft quarter in peanut butter, but as we dug into those numbers, we did see several customers adjusting inventory. We would expect some of that to come back and the consumption data around peanut butter remains reasonably strong as well. So, I think that – all of those things put together give us some confidence in the back half.

Thank you very much. I’ll pass it along.

Thank you. Our next question comes from Andrew Lazar with Barclays. Your life is open.

Good morning, everybody.

Good morning, Andrew.

Hi. Just on the – digging in a little bit on the upcoming launch into mass premium, I guess Nature’s Recipe has been a, call it, maybe low-single-digit share brand or so in the pet specialty space for quite some time. I know there’s been a number of efforts against the brand over time, relaunches and such. Don’t know that it’s necessarily moved the needle on that brand a ton. So, I’m just trying to get a sense of – a little bit more on the thinking behind choosing that as the brand, that was the right one for the mass premium launch, just a little bit more on your thinking into that. And should we be concerned at all about any reaction on the Nature’s Recipe brand from, let’s say, retailers in the specialty channel as you take this brand into the mass space?

Hi, Andrew. It’s Barry. Let me answer that question for you. As you know, we’ve been giving a lot of thought to how to enter the premium segment and we explored a number of alternatives including would we cross one of our brands. And as we look in our portfolio, we really believe the Nature’s Recipe is the right brand. That brand has about 35 years of history and heritage in the pet specialty channel. And as we look at what the consumer is looking for in the mass and grocery channels, we believe that is the right brand. The acceptance from the retailers as we’ve taken that out as part of the launch has exceeded our expectations. So, we definitely believe that’s the right brand. Our retailers have confirmed with us it’s the right brand, it’s the right time and we’re the right company to bring that brand into the segment. From a growth perspective, we are developing a marketing communications plan. We’ll have marketing in place fourth quarter to support the launch and then we’ll have a national campaign next year really to speak to the attributes of the brand. From a competitive or reaction from the pet specialty retailers, we shared our decision with them right upfront when we made the decision to launch. And we anticipate that both of those retailers will continue to support the brand in their stores. And so, again, I think it speaks to the strength of the brand at both pet specialty as well as the potential that it has been in mass and grocery.

Great. Thanks very much.

Thank you. Our next question comes from Ken Goldman with J.P. Morgan. Your line is open.

Hi. Thanks so much. I wanted to get a little bit of more color on the mainstream pet business. Barry, as you're getting more and more involved in this, what are you learning about maybe what went wrong, what could've been done better, what help can you give us in terms of what's going to change and, I think, most importantly, maybe on the outside, what markers maybe should we be looking for to sort of get a sense of when some of these big brands that maybe have dragged you guys a little bit, improve a little bit from here?

Sure. Let me just share with you some of our learnings and my own personal learnings. I think, as we said last quarter, price is paramount. And you have to be priced right in order to compete in mainstream dog. And I think with our bonus bags in place, we’re certainly seeing the benefit of being priced right. Just to give some color there, if we think about our key – one of our major retailers, the number one retailer who over-indexes on [indiscernible], that brand was down – if you look at a 12-month period, we’re down 12%. If you look in the last quarter, we’re down just under 6%. So, I think that speaks to the positive trends when you get price right. You also have to market the brand and have communications directed at the consumer. So, we will be back marketing that brand in F18. We’re refreshing packaging. We’re bringing some innovation to the category. So, I think those are the – it’s just the fundamentals of marketing a brand, especially when you're up against major competitors like we’re. So, I think those are some of the learnings. And we’re seeing some nice positive trends based on the trends that we’ve seen. We’re now confident that we should be back in the marketplace in marketing that brand.

Thank you very much.

Thank you. Our next question comes from Chris Growe with Stifel. Your line is open.

Hi. Good morning.

Good morning.

Hi. I just had a question, first of all, on the marketing. I think you have been talking about $40 million, now it’s $35 million, not a significant change. But I was just curious, I’ve heard about some incremental trade spending in some categories, is there any kind of shift in spending? Maybe you could also talk about your kind of trading spending programs and if those are going up from here?

Hey, Chris. This is Mark Belgya. So, as you noted, we did take down our marketing spend a little bit. But as you said, it’s $5 million. It’s pretty insignificant on an over $400 million base. So, there’s really been no significant changes from marketing to trade. It’s just – when you look at these programs, you think about the number of brands we’re supporting. There is always going to be a little bit of flexibility. And so, we feel good. I think the one thing that I would like to maybe address here while we’re on the subject of marketing – it’s probably on some folks mind – but I'm sure everyone recalls at the end of Q1, we had indicated that part of the over-delivery against our first quarter was due to a time shift in marketing spend. And we had anticipated that – a fair amount of that which was pet related would slide into Q2 and kind of guided to that. As it turned out, shortly after we got into Q2, we had landed on our decision around Nature’s Recipe. And just as I think – and, Barry, I won’t speak for you – but I think that the pet teams have stepped back and said how do we want to make sure that we have a successful launch. We really took pause and challenged some of our working spend in some of the other areas. So, what’s happened then is we shifted it once again, if you will, into Q4. A lot of those dollars we talked about in Q2 shifting are just moving into Q4. And that clearly contributed to the earnings for the quarter. So, I don’t know, guys, if you had any other comments around trade spend trends.

Yeah. I guess comment back on both our coffee, our peanut butter, our big categories and our baking business. I would say our focus is on trade spend efficiency and is there the opportunity to cut some trade. And I know the RGM, revenue growth management, term is a buzzword in a number of our peers’ results and commentary. I think we have great margins in our business. And if we can drive topline, which, as you know, in our industry is not the easiest thing to do right now, that would be our first choice with our trade funds. Let’s drive effective topline. There are places where we have the opportunity to trim it a little bit. I would say we're not seeing surprises. Barry spoke to the competitive nature of mainstream pet. But if you come out of – if you look at peanut butter, if you look at coffee, if you look at our baking business businesses, our oils business, those are traditionally trade spend businesses. I don’t think there are any surprises competitively across of fall bake merchandising or the merchandising into the third quarter.

[indiscernible]. Nothing to add other than what you and Steve have commented on.

Okay, thank you. And I just had one quick follow-up for Mark Belgya. You mentioned inflation in some categories, is that the absence of – or if you will, deflation moving back more towards stabilization or is that actual inflation that maybe requires some pricing in the future?

It is the latter, Chris. We think – and again, I think everyone probably track the commodities particularly close. And we are and have been seeing a shift from sort of the low period we’ve had in the last couple of years. And several of our categories are moving, some more than others. And as you know, we – as category – pricing leaders in each of our category, we’ll take action. So, some of that has clearly been built into our back half topline assumption.

Okay, great. Thanks for the help there.

Thank you.

Thank you. Our next question comes from Mario Contreras with Deutsche Bank. Your line is open.

Hi. Good morning.

Good morning.

So, I wanted to follow-up again on the launch of Nature's Recipe into the mass channel. Can you just remind us how big is Nature’s Recipe of your current pet business?

Currently, it’s about $100 million brand.

Okay. And then have you – from your conversations with retailers, are you getting the sense that that's purely incremental space or is there any shift away from some of the mainstream brands to accommodate these new products?

I think there will be some shift, but we believe it will be significantly incremental to the category.

Okay. And then just, I guess, one last one on the same topic. Is there any differentiation in terms of pricing, packaging size, labels versus what consumers might see in the pet specialty channel versus what they might see in the mass and grocery? Thanks.

There may be some changes over time. But as we thought about this decision, it really was about speed to market. So, we are taking product packaging that currently exists in the specialty channel and that’s what will support our initial launch. As we continue to refine the line and packaging, you may see some changes. But the initial launch will be identical to what’s in the market.

And, Mario, this is Mark Smucker. Just on the sort of the pet business, both Nature’s Recipe and Natural Balance, if you take – just strategically take a step back, obviously, you guys all know that we got in the pet business – obviously, great category. It’s predominantly a branded category across multiple segments. Obviously, snacks. And this premium segment are very important. And so, if you think about similarly to other businesses that we’re in, our strategy is always to play in all of the segments if we can and then make sure that when we’re thinking about growth and incrementality, we really want to make sure we're focusing on those areas where we can achieve the most growth. So, obviously, snacks, we’ll continue to focus on. But if you think about premium pet, whether it is pet specialty which is a very important channel for us, as well as the mass channel, our goal is really to have a stronger presence in both. So, we, obviously, went into, we expanded our presence in with Natural Balance early on after we acquired the business, which was obviously a good thing, and we’re going to continue to support that brand with national advertising as well as just leveraging our scale in the mainstream channels. And, again, going back, just the fact that we really believe that this Nature’s Recipe because it’s an existing brand and because – even though it is a smaller brand in that, it is known as a premium – a more premium brand at an affordable price. And so, that's why we think it fits nicely in that channel. So just really is about strategy and making sure we’re in the growth segment.

That’s very helpful. Thanks, everyone.

Thank you. Our next question comes from Alexia Howard with Bernstein. Your line is open.

Good morning, everyone.

Good morning, Alexia.

Okay. So, two quick questions. First of all, in the pet business, how worried are you that the treat sales seem to be falling fairly substantially in the mainstream measured channel? Is there something that’s offsetting that to make it up elsewhere?

Alexia, this is Barry. I’m sorry. Could you just repeat the first part of that question?

The treats part – the pet treat part, that’s, obviously, high margin. It’s, historically, been a growth piece of the business. Seems to be falling in measured channels.

Yeah. That’s a fair point. One of the things that Mark commented is we have seen some of the shift as far as our sales this quarter where we have some promotion activity that shifted into the third quarter. The snack category is still growing. There has been a slight decline in that growth. Milk-Bone, though, is still growing. We have a 50% share of the biscuit category. We just took number one position with Pup-Peroni in the soft and chewy category. So, we still have some great momentum with our brands and some innovation in the pipeline that we think will recharge the growth of that category. So, overall, the brands are healthy. The category is growing and we still have a lot of upside in that segment of our business.

Great. And as a follow-up, can I ask about your appetite for acquisition? Has leverage now come down to a point where you can start to consider medium to large scale acquisitions again? What are your criteria that and how much incremental leverage would you be prepared to take on at this point if there was something out there that you really wanted? Thank you. I’ll pass it on.

Hi, Alexia. Mark Belgya. Great question. As we have consistently said probably for the better part of over a year now, the closer we get to a three time or underlevered, it opens up the door for some of the strategic things we can do. It’s not a hard and fast we need to get there. If there’s an opportunity that comes along, we’re comfortable of levering up. And maybe I’ll ask for Mark to comment in a moment, but just in terms of what we’re looking for and what’s out there, there are a number of assets. You can imagine that – I would call, more of the small to mid-sized bolt-on opportunities, a lot around sort of the trends, whether it’s convenience, good for you type products, clean label product, a lot in the natural space. And so, we have been looking and have not necessarily limited ourselves just because of where we are from a leverage position, particularly as it bolt-ons and we will continue to do that. In terms of where we would lever, we went over four times with the transaction of Big Heart, and what I would frame in is to say that, we were comfortable there. And the reason we were comfortable is the cash generation that came out of that transaction, both from the business itself and the synergy opportunities and the quickness of the paydown made it comfortable. So is that a hard and fast target? Maybe, maybe not. But, certainly, it’s proven that we were willing to go up there as long as there is a good sense of the cash generation out of that.

Great, thank you very much. I’ll pass it on.

Mark Smucker. Just to add that strategically acquisitions for us are clearly still part of our strategy. We deemphasize them with our long-term growth rates because we – as we talk to our investors and you folks, we wanted to make sure that we are focusing on the growth that we can deliver out of our existing business, but it certainly is still part of our strategy. We always say we keep our line in the water. And as things come up, whether they be large, iconic, leading brands or businesses like that, but also, as Mark mentioned, the more – the smaller, more on-trend things are clearly part of the strategy as well and getting that balance right is key.

Thank you.

Thank you. Our next question comes from our Robert Moskow with Credit Suisse. Your line is open.

Thank you. I was just trying to go back to recent history. I think the last time you took an increase on pricing in coffee was fiscal 2015 and that led to a pretty substantial decline in profits for the division. So, my question is, do you think you’re in better shape this time once you have to start raising coffee prices to manage your portion of the profit pool and still grow profits or do you think there's a risk to that? The second question, I dug a little deeper into Meow Mix. I saw the declines in the retail sales. And I remember you said that the advertising campaign had actually started in August, like you were on air in August. Di you have to take that ad campaign off air and is that part of the reason why the sales on Meow Mix declined? Thanks.

Hi, Rob. Steve. I’ll start with the coffee price increase dialog and then, Barry, you can follow-up on the cat food.

Sure.

Rob, I think there’s a couple of things we need to think about today versus then. Obviously, we took the coffee pricing down because we had coffee costs that could support that. Coffee costs were relatively low even compared to any kind of averages, right? So, it’d be reasonable to think that in that kind of environment, we would have been longer than normal, right? And so, as we’ve seen coffee costs go up, yes, they’re up, but they’re only up – if you about $1.70 Arabica, it’s not that much over the five or ten-year average, right? So, those are not high coffee costs, if you think about what we’ve seen in past years in the $2 and $2.52 type of thing. So, we don’t think Arabica is in anywhere near those kinds of price points. We’ve also learned a lot from that one instance where we took price up and we crossed two dead files. If you remember, we took two dead files. If you remember, we took two dead files on your key promoted sizes. And we would have coverage in places that would not cause us to have to do that. So, if there is pricing in coffee, we think it will be much more measured. And then the last thing I’d remind you of is the downsize we did in the container. And so, if you remember, in that timeframe, our competitor was promoting an 11% smaller container than we were. And now that our containers are similar – so I think there's a couple of dynamics that would suggest that coffee pricing that we would see today or project, certainly, through this fiscal year, but well into next year is not going to put us in the position that we were when it impacted our margins. [indiscernible].

Steve, the only other thing I would add – and then – I just kind of thought this, I’m not sure how material it is. But the other thing, if you look since that time, we had the addition of Dunkin’ K-cup. So, we had another couple hundred million dollars of sales that are in a category that’s not impacted as much by price change.

Yeah.

Okay, and then the Meow Mix?

This is Barry. Happy to answer that for you as well. As far as Meow Mix is concerned, we have had not some of the most significant innovation against that brand this past year in the form of our bistro launch, with the strategy – how do we leverage our strength in dry across wet and treats. That launch where we had that product placed has gone very well. We have trial and repeat strong. And we have advertising in place supporting that brand and that launch. So, we’re not off air. We’re actually on air advertising. Sorry, if you haven’t seen that. But we are supporting that launch. And we’re starting to see some nice momentum behind our total Meow Mix brand as a result of that launch. And we’ll continue to fill distribution gaps with bistro based on its performance in market. So, we think that was the right decision across our total – what we’re calling our Meow Mix Total Solution across each segment in cat. So, innovation is performing well and we think that has strengthened our position across the cat food category.

Okay, I will see if I can find it in the Nielsen data. I did not see it come up. Thank you.

You’re welcome.

Thank you. Our next question comes from Jason English with Goldman Sachs. Your line is open.

Good morning, guys. Thank you for the question.

Good morning, Jason.

I wanted to come back to the Nature's Recipe line of questioning. Are you planning for declines in pet specialty going forward across the portfolio?

Yes, there will be some decline in pet specialty on that brand. So, I think we’ll probably some reduced SKUs and assortment in pet specialty. So, yeah, there will be some decline in that channel. But what it allows us to do is focus on Natural Balance. We said that’s our flagship brand. And what it does allow is our team to really focus and get behind that brand because that will be the main driver of growth in that channel.

This is a long time ago, but I think P&G did something similar 15, 20 years ago, somewhere in that time frame. And it impacted their whole portfolio in terms of retailer backlash. I'm sure you guys have studied that case study. It sounds like from a planning perspective, you are not really viewing that as the appropriate precedent since you are expecting the rest of your portfolio to do better. So, can you help us understand maybe why that isn't the appropriate precedent?

Yeah. We’re certainly aware of what took place. But I think as I stated earlier, I think there is no question that the consumer demand for this type of product in the mass and grocery channels it there. And our retailers have confirmed that with us. So, we’ve given this a lot of – Jason, just based on precedent and understanding channel impact, but we’re confident based on the launch both in specialty and in mass and grocery that this was the right decision. And the marketing investments we’re going to put behind this brand to make sure that it turns and it’s successful with the consumer as well.

Jason, it’s Mark Smucker. I would add that they are – we’re in different times. As Barry said, I think the demand in the mass premium segment is strong. But I actually think a lot of the credit goes to our team and our sales team and Barry’s team as you think about how good our relationships are with our customers. They go all the way up to the very top of the organization and that really does make a difference. And even just thinking about what we’re bringing to the table in the pet specialty channel and we’re able to support the Natural Balance brand as well, and so bringing those additional – that additional support to the table helps with that relationship as well and helps offset some of what might be a – maybe a reduced SKU count.

Okay, got it. Thanks, guys. I will pass it on.

Thanks, Jason.

Thank you. Our next question comes from John Baumgartner with Wells Fargo. Your line is open.

Hi, good morning. Thanks for the question. Barry, I wanted to come back to your comments on mainstream pet. So, I can appreciate the magnitude of volume declines have moderated, but the depth of decline, it’s still pretty meaningful even after you went and reduced prices. So, can you speak to what comes next? What really gets you back to flat volumes in that mainstream price point and ideally back to growth? Is it something of a hybrid approach where you can go and renovate around ingredients but at more of a mass price point? Would you accept margin pressure to do that? Just how much heavy lifting really remains in that price point? Thank you.

Sure, John. It’s Barry. Let me add some color to that. Of course, we have recently even expanded distribution on the bonus bag. So, we’ve continued to make sure we get that distribution more broadly across the channel. And then, as we think about support behind the brand, we have to bring some news to the Kibbles 'n Bits brand, go back to the taste equity – there’s a consumer segment that is looking for taste not at the expense of quality or a helpful product for their dog. So, as we’re thinking about that brand, how do we get back to the taste equity offer at a price that makes sense and then have some meaningful marketing support behind the brand to drive the growth of the Kibbles 'n Bits brand. So, that is our plan. And we’re confident that we’re seeing enough stabilization with that marketing investments. We’ll get that brand back to slow growth.

Great. Thanks, Barry.

Thank you. Our next question comes from Farha Aslam with Stephens. Your line is open.

Hi, good morning.

Good morning, Farha.

My first question is on Folgers. The volumes on that core business were down 10% in the quarter. Is there something to do with timing? Will that turn around next quarter?

I think if you look at it, its dollars down 10%. Volume was down 5%. And if you look at that, most of that volume – again, this is a deep dive into IRI or Nielsen, but virtually all of that was in our opening price point SKUs, what we call, customers – those are items that we promote when coffee prices are very high. When coffee prices are low, they tend to struggle because there’s very little gap between the two. So, I think we can provide that detail. But, no, our – our classic roast item is actually up 2% in volume if you go through the numbers.

Yeah, Farha. It’s Mark Smucker. Remember, when you see commodity costs, coffee costs as low as they have been and you get price compression in the category, our opening price point SKUs don't do as well because people trade up to classic roast and that’s what we’ve seen.

And that's good for you if people trade up to classic roast?

Yes, yes. When you see coffee prices as low as they’ve been, people will trade up to classic roast. When we see excessively high commodity costs, elasticity will drive people down to the opening price point SKUs.

Yeah. You’ll recall – Farha, this is Mark. You’ll recall a couple of years ago – actually, a couple of times over the last three or four years, when we talked about sort of the $10 price point, this is a good case where that obviously comes down and narrows that price gap between opening price points in our classic line.

Yeah. And the price point – our promoted price point on 30.9-ounce canister has been in the $6.99 realm. So, we’re well below those thresholds.

And then, for Barry, if you think about Natural Balance and Natural Recipe, what kind of growth can we expect on those two brands in 2017? And then if we think longer-term 2018 and beyond, how should we think about the growth of those two brands?

We’re actually not putting out specific numbers on Nature’s Recipe. We’re just in the stage of launching that brand. What I would share with you is we would expect to have shelf space similar to our competitors in the mass and grocery channels. So just would frame it in in terms of shelf space based on our initial distribution. As far as Natural Balance growth, the balance of this year – for this fiscal year, remember, we’re lapping last year's incremental distribution within the major retailer in that channel. I would say year-over-year if you take that out, we would expect to see growth of low single digits.

And then like long term if that’s the growth rate we can expect?

The next year, I think again with the focus of our team on Natural Balance in the specialty channel, I think we’ll see growth accelerate and we’re also seeing some fantastic growth within e-commerce. We’re seeing double-digit growth in that channel and a significant amount of the Natural Balance brand is similar to what we’ve seen with other brands in pet specialty is that that shift into e-commerce, we’re experiencing the same thing. That’s what we’re experiencing and seeing double-digit growth and would expect that to continue in that channel.

Okay. Thank you very much.

Thank you. Our next question comes from Pablo Zuanic with SIG. Your line is open.

Hi. Good morning. This is Aatish Shah in for Pablo. Just two quick questions. One regarding pet food, again, I want to see if you can break down sales growth for the mass grocery versus specialty? It seemed like there might be a similar decline in both. And then two, regarding coffee, is it fair to say that K-Cup sales growth were flat for the quarter with Folgers offsetting Dunkin' growth?

Barry, you want to start?

On the question on the growth rates – was it specialty channel and for mass? Just clarify that.

Yes, just mass and grocery versus the specialty growth for pet food specifically.

So, I guess, what I would say is we haven't really changed much from what we’ve said previously. Mass right now – it’s always been sort of a flat to just modestly above. We clearly have been running below that. But that’s kind of where we see that category. It’s a little preliminary quite candidly to give you a really good number on the traditional growth rate in mass channel, just because we need to sort of see the effect of Nature’s Recipe. I think Barry’s comment about what we expect from the distribution capability of that Nature’s Recipe and there’s enough out there that you can do some comparables to see kind of where the expectation is there. And then specialty, I know we commented previously that channel has slowed some. I think the other competitors have noted similarities. But Barry’s point, albeit somewhat still small, but growing. The e-commerce cannot be taken lightly. And we still think there's a lot of opportunity in that channel. I think the other thing I’d reinforce in the specialty area, for us, in particular, is there’s still profitability opportunity. And we’ve seen that start to turn. We’ve talked about that. That was certainly an under-indexed category for us and directly related to our segment profit. We’re seeing turns on that. So, we still feel good about those channels. And again, I think with e-commerce and Natural Balance focus, we’ll see good growth.

Let me comment on K-Cups. I think it depends on if you’re looking at dollars or units because I’m sure we’ve guided that there has been price compression in mainstream K-Cups or across all of K-Cups. I think you’ve heard that talked about in our peers or competitors’ releases. And so, our K-Cups in actual units and equivalent volume are up both in Folgers, in Dunkin’ and up dramatically and quite frankly we sell all those small business. That volume gain translates into dollars gains in Bustelo and in Dunkin’. The dollars are down a little bit in Folgers only because of the pricing that we’ve taken to support that. But the total K-Cup business is up nicely. So, we feel really good to the fact that our legacy K-Cup business grew in units, our Dunkin’ business is up dramatically and our Bustelo business frankly is on fire. So, those segments, all three, are what are helping drive the mix on our coffee business.

Great, thank you.

Thank you. Our next question comes from Akshay Jagdale with Jefferies. Your line is open.

Good morning. Thanks for the question. I just want to follow up quickly not specific to K-Cups, but related. So, it's a coffee question. So, you mentioned when coffee prices are low, your opening price points and sort of lower-priced items struggle a bit and the premium items do better. Can you give us a rough estimate of the overall portfolio, like how much you'd consider OPP, how much mainstream versus premium? And as prices go up next year, I'm guessing that this phenomenon is going to reverse. So, net-net, I think it's better for your company to have lower coffee costs. So just help me understand that dynamic. I'm just trying to think about next year, with prices going up, it looks like the environment to produce growth is a little bit worse than it was this year.

Akshay, let me attempt to do that. Our OPP business is relatively small in the mix. And it’s concentrated in the retailers you would expect to be concentrated in. It’s a big business at value retailers, right, whether that be the dollar channel, mass retail channel, the club channel. So, those SKUs exist in those environments where the consumer goes for value. When you're promoting our 30.9-ounce canister, it’s $6.99. A small difference in the everyday price of OPP is not that exciting to the consumer. So, yes, that will be a back stop for those consumers as coffee pricing moves up. But moving coffee price from, say, $6.99 to $7.99 doesn’t scare me there. I think Mark mentioned this in his opening – when OPP becomes very attractive is when you get to those $9.99, $10.99 price points. We have seen that in history, remember, we downsized the canister. So, I think we’re insulated from some of that. So, I don't want us to think that $1.70 Arabica takes us into any price point that we should all be afraid of, right? We, obviously, still think this is relatively moderately priced Arabica. So, I think we’re some way away from us having a discussion where we would be concerned about the absolute price points having some kind of dramatic effect and swinging our volume within our mix.

Akshay, it’s Mark Belgya. I guess, as I think back what we talked about over the years in terms of breakdown, broad-brush, I’d say about two-thirds of our total U.S. Retail Coffee sales will be considered mainstream. So, that would include everything we’ve talked about, complements, classic, OPP and then the other two – third obviously would fall between K-Cups and premium.

That's helpful. And just one quick follow-up on synergies. So, this quarter it seems like the synergy capture was certainly – it was better than we expected. Was it better than what you had expected? And I don't think you changed your synergy guidance for the year. So, can you help me bridge the two? Thanks.

Yeah. Again, it’s Mark. Our performance on synergies did exceed our expectations for Q2. And you’re right, we haven’t adjusted – I think we would like to get a little bit more time, but there's no indication that we will not continue down our synergy path. I think one way to think about our synergy number is, we’re talking about $100 million incremental through this year and $140 million capture through the end of this fiscal. But with programs in place, I would say that we’re probably on a run rate right now to $180 million to $185 million. So, said differently, we’ve got about $15 million to $20 million to tie down here in the next several months and we’ll have that $200 million locked in as we head into fiscal ’18. So, we’re in really good shape. The other comment, Akshay, I would say about synergies is, on the SD&A, one of the things – we talked marketing. I know there's probably some discussion about the marketing shift being a major contributor to the earnings, but we did deliver pretty significant reductions in our, what I would call, administrative costs. So, that’s a combination of synergy recognition, some of the additional synergies we’re following there, and some are quite candidly just very strong cost management across the organization. So, some of the dollars are just incremental program that people put in place above and beyond the $200 million synergy target.

Thank you. I will pass it on.

Thank you. Our last question comes from the line of Matthew Grainger with Morgan Stanley. Your line is open.

Great. Hi, everyone. Thanks for the question.

Good morning.

I just had two. One, coming back to pet, I was hoping you could elaborate a little bit more on the strategy within e-commerce because you've pointed out a number of times that it's growing well off a small base and that it's important. I don't have a strong sense yet for what you are doing to build out that channel more aggressively and ensure that you don't end up in an under-indexed position 12, 18 months from now.

Matthew, this is Mark Smucker. I’ll start. And if Barry has anything to add, he’ll certainly chime in. So, first of all, as you know, our industry is, generally speaking, underdeveloped in e-commerce channel and, obviously, the focus for all of us. Where I think – we clearly have an e-commerce business. We are serving the e-commerce channels and the different customers there. We do have plans to continue to strengthen our e-commerce organization as well as meet the needs of – the unique needs of each of our e-commerce customers. And it is a journey. But it is something that is one of our key priorities. As it relates to the pets specifically, one of the reasons why those products are uniquely qualified to grow in that channel is because typically they are a recurring purchase and they are very heavy. And so, it's helpful to the consumer. It actually has -- many folks have that step-delivered to their front doorstep, and so really it is the nature of the business that is helping to drive growth there.

That’s great, Mark. And what I would also add from a pet perspective is we deal directly with the major commerce retailers. And so, that is really attributed to a lot of our growth. So, that direct relationship is how we build our business together.

Okay, understood. Thanks, both. And then just last question, the price increase you mentioned in fruit spreads, if you could just talk about the competitive dynamic at the moment. It seemed fairly rational recently, just whether there's any sensitivity right now to the risk of widening price gaps with your key competitor there and whether you would have any news or innovation plan that would help support the pricing that you have announced?

No. I think we’ve built so much credibility with the retailer – and they understand that we wouldn’t take that pricing if it wasn’t ingredient based and commodity based. So, you see it reflected on the shelf. It went into effect at the end of last quarter and we see it at all major retailers in place. And the initial look and volume is very encouraging. So, that’s a relatively small category for us, but important. And I think the dynamics that we face, I would imagine the industry faces. So, I would expect that both the private label and our competitors to be in the same situation.

Okay, great. Thanks again.

Thank you. And we have a question from the line of Jon Andersen - William Blair. Your line is open.

Thanks so much for squeezing me in here. So, at the top of the call, there was some discussion around new capabilities. We've, obviously, talked a lot about innovation here, e-commerce. One of the items that was discussed was revenue management. And I was just wondering if you could talk a little bit more about what that encompasses, what your kind of plans and expectations around that revenue management initiative are, so that we can start thinking about maybe benefits of that effort and the timing of those benefits? Thank you.

Jon, it’s Mark Smucker. I’ll start and maybe Steve if he has anything to add. But, first of all, a of things. As it relates to – everybody thinks about revenue management a lot of time as trade. As we all know, it is the combination of trade, pricing, all of those, and the strategies behind them that encompass revenue growth management. And so, as it relates to our trade practices, we are pretty good at doing that. We have had a very good track record with our customers at providing the right programs and efficiencies there. I think what you’ll see changing over time – and this is a Smucker comment and probably an industry comment as well – is, as Steve mentioned earlier, the need to get more dialed in and precise, and so as we think about being more strategic as it relates to the total revenue growth management, our goal over time, through the development of skills, potentially new systems, better analytics, more centralized data, those types of things, over time, should provide us with the capability to become more strategic in revenue management and more focused as we think about how we deploy pricing and trade across our respective customer base.

Yeah. The only thing I would add is maybe an example on the fruit spreads price increased that we discussed today. If you think the fruit spread category, it includes a number of segments and number of sizes in a number of different retail environments, right. It’s in everything from the EDLP to the high or low retailer. We’ve got a 10-ounce small specialty jar and a 32-ounce promoted grape jelly. So, in order to understand each one of those slopes, in order to better understand, it’s a pennies business, right? So, if we can get a couple of pennies right on each one of those slopes. If our slope between 18 ounce and 32 ounce is right on, what’s going to drive the most volume at the best price point. We make some headway on that. I think the technology is there today and I think us as well as many of our peers have invested in human capital to leverage that technology, to get some of those details right. So, we’re hoping to scrap a couple of margin points out of it across different businesses over time. And that money will be invested in our business or brought back to the bottom line. We’ll make those decisions depending on the category, the size, the magnitude et cetera.

Thanks, really helpful. Thank you.

Thank you. I’ll now turn the call back to management to conclude.

Well, again, this is Mark Smucker. Just wanted to thank all of you for taking the time this morning to join the call. And again, thank you very much for your interest in our company. Have a great day.

Ladies and gentlemen, if you wish to access the rebroadcast after this live call, you may do so by dialing 855-859-2056 or 404-537-3406, with a passcode of 97711320. This concludes our conference call for today. Thank you all for participating. And have a nice day. All parties may now disconnect.