Campbell Soup Company
Q2 2017 Earnings Call Transcript

Published: 17 Feb 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Campbell Soup's Second Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I'd now like to turn the conference over Ken Gosnell, Vice President-Finance Strategy & Investor Relations. Please go ahead.

[Kenneth Gosnell:]

Thank you, Candice. Good morning, everyone. Welcome to the second quarter earnings call for Campbell Soup's fiscal 2017. With me here in New Jersey are Denise Morrison, President and CEO; and Anthony DiSilvestro, CFO. As usual, we've created slides to accompany our earnings presentation. You will find the slides posted on our website this morning at investor.campbellsoupcompany.com. This call is open to the media who participate in listen-only mode. Today, we'll make forward-looking statements, which reflect our current expectations. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risks. Please refer to slide 2 or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in forward-looking statements. Because we use non-GAAP measures, we have provided a reconciliation of these measures to the most directly comparable GAAP measure, which is included in our appendix. One final item before we begin our discussion of the quarter, I'd like to cordially invite our interested shareholders, investors and members of the media and consumers to listen to and view our Investor Presentation at CAGNY, which will be video webcast live on Wednesday, February 22, at 10

[Denise M. Morrison:]

Thank you, Ken. Good morning, everyone, and welcome to our second quarter earnings call. Today I'll share my perspective on our performance in the quarter and provide my view on our progress across each of our three divisions. Anthony will follow with a detailed financial review. Let's be real. I am not satisfied with our overall sales performance in the quarter. Organic sales declined 2%, with the most prominent declines in Campbell Fresh and V8 shelf-stable beverages. Additionally, in the Campbell Fresh segment, we recorded non-cash impairment charges related to the carrot and carrot ingredient and Garden Fresh Gourmet reporting units. Anthony will walk you through additional details during his comments. There were some bright spots in the quarter, such as growth in U.S. soup, simple meals, Pepperidge Farm snacks, and fresh soup. Our adjusted gross margin increased 70 basis points, all of which was achieved by Americas Simple Meals and Beverages. Another positive result was the over-delivery of our cost-savings initiatives. As we announced this morning, we now expect to achieve our cost-savings target a year ahead of schedule. Based on the success of the program to-date and the identification of additional savings opportunities, we're raising our cost-savings target from $300 million by the end of fiscal 2018 to $450 million by the end of fiscal 2020. Looking at the first half, organic sales declined 1%, adjusted EBIT was comparable to a year ago, and adjusted earnings per share increased 5%. With the expectation of improved sales performance in the second half of the year, we reaffirmed our full-year guidance this morning. Now let me offer my perspective on the performance of each of our three divisions in the quarter. Let's start with the Campbell Fresh division. The CPG segment of C-Fresh includes Bolthouse Farms beverages and salad dressings, Garden Fresh Gourmet salsa, hummus, dips and chips and fresh soups. The Farms portion of the portfolio includes carrots and carrot ingredients. The division's performance was below our expectations this quarter. C-Fresh is an important strategic business for Campbell, and we remain confident in the growth potential of the packaged fresh category, as consumer preferences continue to shift towards fresher and healthier foods. In fact, nearly 80% of consumers, including younger ones, are trying to eat more fresh foods. These consumers not only believe that fresh foods are cleaner, healthier and less processed, but that they also taste better. We acquired two packaged fresh businesses

[Anthony P. DiSilvestro:]

Thanks, Denise, and good morning. Before reviewing our results, I wanted to give you my perspective on the quarter. We are disappointed with our sales performance. Declines in C-Fresh and V8 were the primary drivers. On the positive side, we grew U.S. soup sales and Pepperidge Farm snacks had a strong quarter. Sales results were below our expectations, primarily due to C-Fresh, as the recovery on beverages and carrots is taking longer than previously anticipated, with the additional impact of heavy rains in the quarter, which had a 40 basis point negative impact on adjusted gross margin. Sales and earnings in Garden Fresh Gourmet also declined. And as Denise mentioned, we recorded non-cash impairment charges totaling $0.58 per share in our GAAP results related to our Campbell Fresh segment. Despite the negative impact from C-Fresh, I'm pleased with our overall adjusted gross margin performance, which was up 70 basis points. We're increasing our cost-savings estimate for 2017 to $85 million, which will put us at our targeted $300 million by the end of fiscal 2017, a year earlier than anticipated. Based on the overall success of the program and the identification of additional savings opportunities, we are increasing our cost-savings target to $450 million by the end of fiscal 2020. While adjusted EPS increased to $0.91 in the quarter, we recognize that the increase is due to a decline in our adjusted tax rate. We're also wrapping a very strong second quarter last year, in which adjusted EPS increased 23%. Lastly, with the increased cost savings and lower cost inflation offsetting incremental marketing investment and lower earnings in C-Fresh, we are reaffirming our fiscal 2017 guidance. Now I'll review our results in more detail. For the second quarter, net sales on an as-reported basis declined by 1% to $2.171 billion. Excluding the favorable impact of currency translation, organic net sales declined 2%, driven by lower volume and higher promotional spending. And as I said earlier, the majority of this decline is driven by lower volumes in Campbell Fresh and our V8 juice business. Adjusted EBIT declined 1% to $417 million, reflecting the impact of lower sales and higher marketing and selling expenses, partly offset by a higher adjusted gross margin percentage. Benefiting from a lower tax rate, adjusted EPS increased 5% or $0.04 to $0.91 per share. For the first half, as-reported and organic net sales both declined by 1% compared to the prior year. Adjusted EBIT was comparable to prior year and adjusted EPS of $1.92 was up 5%. Breaking down our sales performance for the quarter, organic sales declined 2%, driven by a 1 point decline from volume and mix, driven primarily by Campbell Fresh and a 1 point decline from higher promotional spending. In Americas Simple Meals and beverages, promotional spending rates were up on Swanson broth, V8 and in Canada to hold promoter prices following our list price increase. Promotional spending is also up in our Arnott's business in the Asia-Pacific region. Although it rounds to zero on the chart, we did have a slightly positive impact from currency translation, principally the Australian dollar, bringing the change in our as-reported sales to minus 1%. Our adjusted gross margin increased 70 basis points in the quarter. First, cost inflation and other factors had a negative impact of 80 basis points. On a rate basis, cost inflation was about 1%, and in Campbell Fresh, increased costs reflect the impact of heavy rains on carrot yields, lower beverage operating efficiencies, and the overall impact of lower volumes. These negative drivers were partly offset by the benefits from our cost-savings initiatives. Increased promotional spending had a negative impact of 60 basis points, reflecting the drivers I previously discussed. List price increases had a slightly positive impact of 10 basis points, driven primarily by list price actions taken by our retail business in Canada. Mix was slightly favorable, adding 20 basis points, reflecting the sales decline in our lower margin C-Fresh segment. Lastly, our supply chain productivity programs, which are incremental to our cost-savings program, contributed 180 basis points of margin improvement in the quarter. All in, our gross margin percentage increased 70 basis points to 38%. Adjusted marketing and selling expenses increased 5% in the quarter, primarily due to higher advertising and consumer promotion expenses as we reinvest in our brands. The increase in advertising was primarily driven by our investment to support the launch of Well Yes! soups and higher levels of support on V8 juices and Prego pasta sauce. Adjusted administrative expenses declined 3%, reflecting lower incentive compensation compared to the year-ago quarter, partly offset by higher benefit-related costs and investments in long-term innovations. For additional perspective on our performance, this chart breaks down our EPS change between our operating performance and below-the-line items. Adjusted EPS increased $0.04 from $0.87 in the prior-year quarter to $0.91 per share in the current quarter. On a currency neutral basis, decreases in adjusted EBIT had a $0.02 impact on EPS. Share repurchases lowered our share count, adding a penny benefit. Our adjusted tax rate for the quarter decreased by 3.8 points to 27.8%, contributing $0.05 to EPS growth. We benefited from a favorable timing impact related to the impairment charge. This will reverse in the second half and bring us to our forecasted full-year adjusted tax rate, which remains at approximately 32%. Interest was comparable to the prior year as the impact of higher rate was offset by a lower debt level. Currency translation also had no impact on EPS, completing the bridge to $0.91 per share. Now turning to our segment results. In Americas Simple Meals and Beverages, organic sales fell 1% to $1.231 billion, as declines in V8 beverages were mostly offset by gains in soup, Prego pasta sauces, and Plum products. Sales of U.S. soups increased 1%, reflecting double-digit gains in ready-to-serve soups, driven by growth in Chunky and the launch of Well Yes!, mostly offset by declines in broth and condensed soups. The strong performance in Chunky reflects our improved execution, including better advertising and successful new items. The launch of Well Yes! is progressing well with strong customer acceptance and supported with a robust marketing plan. Operating earnings increased 8%, driven by a higher gross margin percentage, which benefited from supply chain productivity improvements, partly offset by increased advertising and consumer promotion expenses. Here's a look at U.S. wet soup category performance and our share results as measured by IRI. For the 52-week period ending January 29, 2017, the category as a whole declined 1.2%. Our sales in measured channels declined 1%. Campbell had a 58.8% market share for the 52-week period with a share gain of 10 basis points. Private label grew share by 70 basis points, finishing at 13.5%. All other branded players collectively had a share of about 28%, declining 80 basis points. In Global Biscuits and Snacks, organic sales decreased 1%, driven by declines in Kelsen in the U.S. and Arnott's biscuits, partly offset by gains in Pepperidge Farm. Pepperidge Farm sales increased as growth in crackers, primarily Goldfish, and cookies was partly offset by declines in fresh bakery and frozen products. Operating earnings declined 4% to $135 million, reflecting a lower gross margin percentage as higher promotional spending and supply chain costs were partly offset by productivity improvements. In the Campbell Fresh segment, organic sales declined 8%, driven by lower sales of carrots, Bolthouse Farms beverages, and Garden Fresh Gourmet, partly offset by gains in refrigerated soups. Operating earnings declined by $24 million to a loss of $3 million, reflecting higher carrot and beverage production costs as well as from lower sales volumes. As Denise mentioned, the recovery from both the market share losses on carrots and the beverage capacity constraints will take longer than originally anticipated. The performance of Garden Fresh Gourmet is also short of expectations. We now expect that for the full year, segment sales and earnings will decline in 2017. The performance of Campbell Fresh is below our previous expectations. We have a new management team in place and they undertook a strategic review, which informed our future plans and expectations for growth. Based on current performance and lower forecasted sales and earnings growth, we recognized non-cash impairment charges of $0.45 per share on the carrots and ingredients business and $0.13 per share on Garden Fresh Gourmet. The other two reporting units in this segment

[Kenneth Gosnell:]

Okay. Thanks, Anthony. We will now start our Q&A session. Since we have limited time, out of fairness to the other callers, please ask only one question at a time. Okay, Candice?

[Operator:]

And our first question comes from Ken Goldman of JPMorgan. Your line is now open.

[Kenneth B. Goldman:]

Hi, and thanks for the question. One of your competitors in biscuits, obviously, made a fairly major announcement last week. Does that announcement in any way, in terms of distribution, make you rethink your distribution, or is it sort of full steam ahead? Pepperidge has an incredible, obviously, DSD system setup. Just curious if that made you guys go back, rethink things in any way or if it's too early to tell? Any help there would be very appreciated.

[Denise M. Morrison:]

Yeah. I'll take that one. Thanks, Ken. We're very pleased with the performance of Pepperidge Farm. We've had, particularly in the snacks business, some really good growth. And our distribution system – DSD distribution system is different, in that it is a network of independent contractors, so that's really how we've assessed it.

[Kenneth B. Goldman:]

Right. So, is the takeaway then that because it's different and because you're pleased with it, we on the outside should interpret it as it's unlikely to see major changes at any point in the near term?

[Denise M. Morrison:]

Yeah. I mean, we're continuing to run our play.

[Kenneth B. Goldman:]

Great. Thanks, Denise.

[Operator:]

Thank you. And our next question comes from Chris Growe of Stifel. Your line is now open.

[Christopher Growe:]

Hi. Good morning.

[Denise M. Morrison:]

Hi, Chris.

[Christopher Growe:]

Hi. I just wanted to ask you in relation to the soup business, the Well Yes! soup product looks to be doing quite well and you had some pipeline fill in the quarter. But did that have an effect on soup sales in the quarter? And if I can ask related to that with the Well Yes! launch, did we see marketing spending go up in relation to that product in the quarter and should we expect that going forward in the second half of the year?

[Anthony P. DiSilvestro:]

Yeah, a couple of things. So, it's a good question. So the impact of Well Yes! on soup sales in the quarter was about 2 points, so it didn't have a benefit to our net sales number. And as you can imagine, most of that is, obviously, in retail inventory, some did pull through, but not a lot. But as we look at the total inventory on soup, there has been some reduction in other areas. So when you put it all together, changes in retailer inventories in soup did not have an impact on our overall soup sales results in the quarter, but there was some puts and takes in there.

[Denise M. Morrison:]

Yeah. We're very happy with the introduction of Well Yes! There were great retail support, 75% ACV distribution, displays everywhere, but we won't get a read on the consumer takeaway really until this quarter.

[Anthony P. DiSilvestro:]

To your second question, this is going to be supported with a fairly comprehensive and robust marketing program, so you can expect, obviously, an increase in marketing behind this in the third quarter.

[Christopher Growe:]

Okay, great. Thanks for the time.

[Operator:]

Thank you. And our next question comes from Bryan Spillane of Bank of America. Your line is now open.

[Denise M. Morrison:]

Hi, Bryan.

[Bryan D. Spillane:]

Hey, good morning, everyone.

[Anthony P. DiSilvestro:]

Hey, Bryan.

[Bryan D. Spillane:]

I guess, just a question about the prospective cost-savings going forward and, I guess, as you're thinking about balancing how much reinvestment versus how much you'll use to sort of support earnings growth, not trying to get you to be specific in terms of earnings targets in the out year, but just can you sort of maybe give us some color in terms of how you might be thinking about that balance going forward with this new savings versus maybe the way you approached the $300 million you've achieved so far?

[Anthony P. DiSilvestro:]

Yeah. I think, Bryan, the way to think about it is against the incremental $150 million, probably about half will go back in terms of reinvestment, so we've talked about the support before. We need to increase the support behind some of our key brands. We need to continue to support new product launches like we're doing with Well Yes! and Prego's Farmers' Market and Tim Tam's in the U.S. and Goldfish with the organic wheat. So we need to continue to do that. We'll continue to invest behind our real food initiatives, removing artificial colors and ingredients, removing BPA for our can liners. We'll also continue to invest in longer-term innovation, things like Habit and the Acre Venture Fund and we'll look to make investments to improve our capabilities in areas like digital and eCommerce. So we have a fairly well-balanced plan in terms of what to do with those cost savings.

[Bryan D. Spillane:]

Okay. Great. Thank you.

[Anthony P. DiSilvestro:]

Sure.

[Operator:]

Thank you. And our next question comes from Andrew Lazar of Barclays. Your line is now open.

[Andrew Lazar:]

Good morning, everybody.

[Denise M. Morrison:]

Hey, Andrew.

[Andrew Lazar:]

Hi. Quick question on C-Fresh. As your commentary was that it seems you're going to be sort of further integrating that division to take advantage, I guess, of the broader scale and scope and capabilities of the larger Campbell organization. And, I guess, my question is, we've all seen I think a lot of examples over time, whether it be the Kashis of the world where the larger company sort of brings the smaller, more entrepreneurial growthier entity sort of in a bigger way into the sort of the more of the mainstream organization. And, I guess, we've seen a number of examples where that's led maybe those more entrepreneurial businesses to maybe lose some of that sort of progressive nutrition swagger or some of what made them special and growthier in the first place. So, I mean, I was just trying to get a sense, it's a little broad but, I guess, how do you guard against taking advantage of what the organization can bring to that and not lose what it is that you bought in those businesses to begin with.

[Denise M. Morrison:]

Andrew, it is a key question. And when I talk about getting the best of small and the best of big, I'm really serious about what we have done is really delineated those parts of the business that really need to be separate and differentiated for the consumer and the customer, and that's all of the marketing and the R&D and insights. And we have this model that we've used very successfully with our Plum organic baby food business by keeping those parts of the business separate that maintains that entrepreneurial culture. However, being able to leverage the scale of Campbell's, particularly in areas of the supply chain and in operations where we have resources that can be used to make them much more effective and efficient and even more important achieve scale, because these are typically smaller companies that need the chassis to increase scale in the marketplace. So we've done this very successfully with Plum and Kelsen. We have not done it with the Campbell Fresh business. And so, the situation that we found ourselves in in the last year, we've been able to insert Campbell executives on the leadership team working in conjunction with Bolthouse Farms executives to maintain that best of small and best of big. So we're really optimistic and we're finding some really great opportunities to put a stronger foundation under the business.

[Andrew Lazar:]

Great. Okay. Thanks for that. And look forward to seeing you next week.

[Denise M. Morrison:]

Yeah. See you next week.

[Operator:]

Thank you. And our next question comes from Robert Moskow of Credit Suisse. Your line is now open. Robert Moskow - Credit Suisse Securities (USA) LLC Hi. Thank you.

[Denise M. Morrison:]

Hi, Rob. Robert Moskow - Credit Suisse Securities (USA) LLC Hi.

[Anthony P. DiSilvestro:]

Hi, Rob. Robert Moskow - Credit Suisse Securities (USA) LLC Hi. I noticed on the opening remarks that you mentioned competitive pressure more often than usual, I would think. It was definitely in fresh bakery and in broth. And my view going into this year was that the food companies would cut costs and focus on price realization and try to avoid deep discounting. Do you see any of that kind of price discipline changing around you in your categories, or do you think it's just kind of a pretty typical year in terms of promotional activity?

[Denise M. Morrison:]

Yeah. I think the activity definitely varies by category. And what we've seen in the fresh bakery business is competition in the area of sandwich bread and Swirl bread. We've recently reformulated our Swirl bread and we're out there now with a much-improved product. So that was a very specific situation. In fresh bakery business, our buns and rolls business continues to rock, so we believe we're all over the issue there. And then in broth, it was really more of a proliferation of private label during the holiday and that produced more price competition and we have responded with increased marketing and actual trade spending to hold our own in that category. So those were two very specific things that we faced. Robert Moskow - Credit Suisse Securities (USA) LLC Can I ask a follow-up to Ken Goldman's question actually? I think what he was kind of getting at is have you ever considered a model where you go to direct-to-customer shipments through warehouses rather than DSD, not so much using – whether you use independent routes. Is that a big savings or is it even possible in Pepperidge Farm?

[Denise M. Morrison:]

Yeah. We've been pleased with the DSD system. The independent contractors, what they bring to the business in terms of selling and merchandising and delivery, it's a quality product. It's perishable, so breakage could be an issue. I think when you consider all of it, we're pleased with our DSD system. Robert Moskow - Credit Suisse Securities (USA) LLC Okay. Thank you.

[Operator:]

Thank you. And our next question comes from David Driscoll of Citi. Your line is now open.

[Denise M. Morrison:]

Hi, David.

[Cornell R. Burnette:]

Hey, good morning. This is Cornell Burnette in with a few questions for David. I just wanted to start off here with ready-to-serve soup, and one of your major competitors made the announcement that they would be reducing capacity. Wanted to get your outlook on what that meant for the category kind of over the long term and specifically does that give you an opportunity perhaps to margin up and be maybe less aggressive with promotions and move prices in a higher direction?

[Denise M. Morrison:]

We're very focused on our soup business. We're particularly pleased with the performance of ready-to-serve soup, whether that be Chunky or the introduction of new Well Yes! I think you need to ask the other guy.

[Cornell R. Burnette:]

Okay. And then on the C-Fresh business, just I know you gave a number of puts and takes of kind of what's going on there this year and some of the things that you're trying to do to get the business back on track. Will some of these headwinds, especially in carrots and issues surrounding the harvest, kind of linger into perhaps F2018 as well?

[Anthony P. DiSilvestro:]

Yeah. So, we've talked about the issues facing us in F2017 and the expectations that the business will decline. We do expect it to turn a bit in the fourth quarter. As we look ahead to F2018, we expect to return to growth on this business both top and bottom line.

[Cornell R. Burnette:]

Okay. Thank you.

[Operator:]

Thank you. And our next question comes from Alexia Howard of Bernstein. Your line is now open.

[Denise M. Morrison:]

Hi Alexia.

[Alexia Jane Howard:]

Hi there.

[Anthony P. DiSilvestro:]

Hi Alexia.

[Alexia Jane Howard:]

I guess, a quick question on the commodity cost outlook here is, obviously, you have slightly different mix of input costs, how are things looking? And if the commodity cost environment is getting a little tougher, do you think you'll be able to pass that on in pricing?

[Anthony P. DiSilvestro:]

Yeah. So I can comment on the commodity cost environment. So, as we look at the full year, we originally thought cost inflation would be around 2% and now we're thinking it closer to 1.5%. So we've seen some favorability relative to our expectations in a couple of areas that are causing that. One is wheat, dairy, resins related to plastic packaging as well as poultry. So, overall, we see a bit of a benefit versus our original expectations. But we are seeing a swing, first half to back half. It was fairly benign when you look at the core ingredients, packaging and energy, and that's starting to tick up in the second half, and there's a couple of areas in particular that we're seeing. One is dairy. The first half of the year we were wrapping avian flu thing, so that's going to go back more toward normal situation. Vegetable oil is kicking up in the second half and we're beginning to see increases in steel cans as well. I don't know if you follow the steel market, but prices are up fairly significantly on steel. So we've got an overall year, which is going to be okay, but we're seeing an increasing headwind in the back half. In terms of pricing, I would say we're not ready to talk about any specific pricing actions, but we're right in the midst of starting to formulate our plans for next year, and I'm sure we'll take this into account.

[Alexia Jane Howard:]

Thank you very much. I'll pass it on.

[Operator:]

Thank you. And our next question comes from Michael Lavery of CLSA. Your line is now open.

[Michael Lavery:]

Good morning.

[Denise M. Morrison:]

Hi Michael.

[Anthony P. DiSilvestro:]

Good morning.

[Michael Lavery:]

Just back on C-Fresh, you said you had a strategic review and, obviously, that had some changes in your outlook and everything else. Did that also include a review of just your interest in that business long term? Are you evaluating potential alternatives in terms of whether you might even still be interested in having an agriculture business or is that a given? And then just on the branding, you said you would want to step up those efforts. Could you give a little better color on what that might be?

[Denise M. Morrison:]

Sure. The strategic review that the new team undertook looked at, once again, the potential for this business, and we verified the consumer trends toward fresh and health and well-being, the fact that these categories are still growing significantly faster than center-store categories, particularly in the categories that we compete in. So we feel really good about this space strategically. We've had some execution issues this year and some weather issues in the agricultural part. That's been unfortunate, but that does not sway us from our long-term strategic vision to really build a fresh food platform for Campbell's. And I think the role of the carrots in the business is the authenticity. It's on trend with consumers' desire for fresh produce. Carrots have had a tough go with drought and with heavy rains and some execution issues in the last year, but I do think that that's an important part. It's also the distribution system and scale in produce for us that makes us more important to the retailer. So I know I'm very committed to the business and we expect big things from it going forward.

[Michael Lavery:]

Okay. Thanks. And just any thoughts on the branding? You said you wanted to step that up. I know you talked about some of the packaging changes. Garden Fresh, for example, I think it may be the new packaging you're showing. Is that some of what you're anticipating or is it beyond some of the packaging changes? What's some of the initiatives there?

[Denise M. Morrison:]

Yeah. I think, over time, we have an opportunity to build two very strong brands here with Bolthouse Farms and Garden Fresh Gourmet. We're continuing to invest in digital marketing, as you point out, some new packaging and definitely new product innovation. So we will continue to support these businesses in the marketplace.

[Michael Lavery:]

Okay. Thank you very much.

[Operator:]

Thank you. And our next question comes from Rob Dickerson of Deutsche Bank. Your line is now open.

[Rob Dickerson:]

Thank you very much.

[Denise M. Morrison:]

Hi, Rob.

[Rob Dickerson:]

Hello. Yeah, just a question around increased brand building potentially over the next, I call it, three to 12 months and in light of, let's say, a competitor who is stepping away from DSD, which could cause some transitional pressure there for them that they've acknowledged upfront. And then also another competitor who seems to be stepping off a bit promotional activity in the soup category and you're showing some near-term gains there. So, I'm just curious, do you – you're, obviously, aware of what's happening in each of your core categories and you're aware of what your competitors are doing. Could you foresee the next 12 months potentially being a period of time in which you might have opportunities to actually increase your investment to try to capture share in kind of a period of instability, so to speak, which I think you actually did fairly well with at one point in time in the bread category? Thanks.

[Denise M. Morrison:]

Yeah. Well, as you can see from the quarter, we're continuing to invest in marketing and brand building. And Anthony pointed out that as we navigate through our cost-savings initiative, which we just increased, we will be spending back on our businesses to continue to build these brands. We still need to drive sustainable profitable sales growth and I fundamentally believe that's going to come from investing in the brands and engaging with the consumer. So we will continue on that track.

[Rob Dickerson:]

Okay. Great. Thanks a lot. I'll see you next week.

[Denise M. Morrison:]

Thank you.

[Operator:]

Thank you. And that concludes our question-and-answer session for today. I'd like to turn the conference back over to Ken Gosnell for closing remarks.

[Kenneth Gosnell:]

Sure. Thanks, Candice. Thank you, everyone, for joining our second quarter earnings call and webcast. A full replay will be available about two hours after this call by going online or calling 1-404-537-3406. The access code is 40985838. You have until March 3, at which point, it will move to our – the earnings call strictly to the website at investor.campbellsoupcompany.com. Just click on Recent Webcasts & Presentation. If you have any further questions, please call me at 856-342-6081. If you're a reporter with questions, please call Carla Burigatto, Director of External Communications, at 856-342-3737. Thank you, everyone.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day, everyone.