Greetings, and welcome to the Fourth Quarter Fiscal 2019 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, June 26, 2019. It is now my pleasure to turn the call over to Jeff Siemon, VP, Investor Relations. Please, go ahead sir.

Thank you, Tanya. And on behalf of General Mills, thanks everyone for joining us this morning. I'm here with Jeff Harmening, our Chairman and CEO; and Don Mulligan, our CFO. In addition, Jon Nudi, who leads our North America Retail segment, is joining us for the Q&A portion of the call. I'll hand the call over to them in a moment, but before I do let me cover a few different housekeeping items. A press release on our Q4 and full year fiscal 2019 Inc. results was issued over the wire services earlier this morning and you can find the release and a copy of the slides that supplement this morning's remarks on our Investor Relations website. I'll remind you that our remarks this morning will include forward-looking statements that are based on management's current views and assumptions. The second slide in today's presentation was factors that could cause our future results to be different than our current estimates. And with that, I'll turn you over to my colleagues, beginning with Jeff.

Thank you, Jeff, and good morning, everyone. In fiscal 2019, we executed well, successfully transitioned Blue Buffalo into our portfolio and delivered on our financial commitments. We met our sales growth guidance and we exceeded our guidance for profit, for earnings per share and for cash flow. We also delivered double-digit top line and bottom line growth for Blue Buffalo, as we said we would at the beginning of the year. And while we're pleased with these results, we know that there's still room for improvement. Turning to fiscal 2020, we'll continue to pursue our Consumer First strategy and our Compete, Accelerate and Reshape growth framework. We'll drive innovation and invest in our brands and capabilities to accelerate organic sales growth. We'll continue to execute our HMM and strategic revenue management, or SRM programs, and maintain our strong margins. And we'll continue our cash discipline to reduce our leverage. On slide 5, you can see the key financial performance metrics for our fourth quarter and the full fiscal year. For the fourth quarter, net sales totaled $4.2 billion, up 9% in constant currency. Organic net sales declined 1%, driven by lower volume. Adjusted operating profit grew 5% in constant currency, driven by the addition of Blue Buffalo and strong HMM savings, partially offset by higher inflation and other supply chain costs. It should be noted that this profit performance compared against by far our strongest quarter of growth last year, when adjusted operating profit was up double digits. Adjusted diluted earnings per share totaled $0.83 and grew 6% in constant currency. For the full year, net sales totaled $16.9 billion, up 9% in constant currency. Organic net sales were in line with year-ago levels, with growth in our Asia and Latin America and Convenience Stores and Foodservice segments offsetting declines…

Thanks, Jeff, and good morning everyone. Jeff provided a high-level summary of our fiscal 2019 financial results. I'll share a few additional details starting with the components of net sales growth on slide 18. Organic net sales were down 1% in the fourth quarter, driven by a lower contribution from pound volume. Organic net price realization and mix was flat in the fourth quarter compared to three points of positive price/mix in the same period last year. Foreign currency translation was a two-point headwind to net sales, and the net impact of acquisitions and divestitures added 10 points to net sales in the quarter, primarily driven by Blue Buffalo. As Jeff mentioned, full year organic net sales were flat to last year with volume down 2% offset by two points of positive price/mix. And on a two-year basis, we saw both organic volume and price/mix improve sequentially from the first half to the second half of fiscal 2019. Turning to our segment results on slide 19. Full year North America retail organic net sales were down 1% unlike Nielsen-measured retail sales growth by about one point, which was in line with the expectations we outlined at the beginning of the year. Our SRM actions drove one point of positive organic price/mix for the full-year, which was two points ahead of last year's results. Fourth quarter organic net sales rounded down to a 2% decline, driven primarily by declines in U.S. Snacks in Canada. We saw unfavorable price/mix in the quarter driven by higher promotional expense, as we returned to normal merchandising levels this quarter after having relatively little in-store activity in last year's Q4. Second half price/mix was favorable by one point in line with the full year results. And fourth quarter retail sales trends were slightly positive in U.S.…

Thank you, Don. And as we look at – as we look at next year, what I would like to say is that, I'm pleased with the way we executed this year. I'm pleased that we transitioned Blue Buffalo effectively into the General Mills family, and especially pleased that we delivered on our financial commitments. We have strong plans in place for fiscal 2020 to drive improved organic sales, while maintaining our strong margins. Firm and confident in our strategies and look forward to taking another step forward in fiscal 2020 on our path toward sustainable long-term growth. With that, I think we'll open-up the line for questions. Operator, can you get us started?

Thank you. [Operator Instructions] Our first question comes from the line of Ken Goldman with JPMorgan. Please proceed with your question.

Hi. Good morning, everybody.

Good morning.

I wanted to ask a quick question about the 13th month for Buff this coming year. Without going into the nitty-gritty my math is that the extra month adds maybe 70 to 90 basis points to your expected organic top line growth rate. I just wanted to make sure that's correct or at least reasonably correct. And is it also safe to assume that the extra month will entirely benefit 4Q 2020?

Yeah, Ken on your last question, yes. It will all – the extra month will all come in Q4. As far as the contributions to the organic growth, I mean, there is really three components. We said that CNF, Europe, Australia and Asia and LatAm will grow at the same rate – grow but at the same rate as this year. So the increase for next year is really – we're seeing it step up from a combination of Blues’ like-for-like growth at 8% to 10% we talked about the extra month and the base business. In fact they grow by about equally weighted, so you are probably a little high on what you're guessing for what you are estimating for the month and you should look for all three of those to have roughly equal weighting in that improvement from this year.

Okay. That's helpful. And then a quick follow-up, Jon, I know you – or I know Jon is going to discuss Snacks at the Investor Day, but it really seems to be worsening at least in what we are seeing in Nielsen right for a while. It was really Fibre One then Nature Valley started getting worse and now even LÄRABAR in measured channels is trending negatively. I know, we don't see everything in these – in Nielsen and IRI, but is there a structural issue you think that's causing really most of your major brands to decline at once here?

Yeah. Ken, thanks for the question. I think the short answer is probably not. In fact LÄRABAR grew 11% for the year. And I think there's some comps as we got into Q4. And LÄRABAR a big portion of that business is actually a non-measured channel's where we continue to do quite well. And we are very focused and frankly not satisfied with our performance on both Nature Valley and Fiber One and that's really what we need to turn around in the coming year. Nature Valley's really about getting back with meaningful innovation. We just launched Krispy Kreme wafer bar that we're excited about and it's very early days, but the early returns are good. And frankly, we didn't execute very well. We missed some key windows from a merchandising standpoint back to school. On Nature Valley, we feel like we've got good plans in place after this year. You know Fibre One's been a structural issue over the last few years. Consumer's, weight managers have really changed in terms of what they're looking for in terms of the macros of a product. So we just reformulated that product. It's flowing in the market now again early days but encouraging signs there as well. So, what I'd tell you we like LÄRABAR we don't believe there's a structural issue there. We love EPIC that's continued to grow nearly 50% this past year. It's really Nature Valley and Fiber One that we're focused on as we move into fiscal 2020.

And to build on to Jon's point….

Thanks, Jon.

I agree with Jon's perspective that it's not structural. It's some of the renovation execution in fact to that end, we're confident we'll sequentially improve in the first quarter in the first half of next year on Snacks and that will accelerate even further in the back half of the year.

Thanks very much.

Thank you. Our next question comes from the line of Rob Dickerson with Deutsche Bank. Please proceed with your question.

Great. Thank you very much. A set of questions just around expectation on brand support in fiscal 2020, it seems like what's implied obviously the guidance is at first essentially operating margin call it to be flat year-over-year. But at the same time, you do have – of your doted you know margin mix benefits. It should be coming from – at least from Blue Buffalo. I'm just curious to hear as you think about total company vis-à-vis kind of the Blue Buffalo benefit, hopefully, it would imply that maybe there's still some margin contraction potential in other parts of the portfolio. And I'm not sure, if that given increased brand support levels or if there's maybe just flex in the overall P&L as we think about next fiscal year? Thanks.

Well, there are two questions in there. One's about brand building support and the other about margins. So let me take the first, and I'll push it over to Don for the second. In terms of brand building support, what you will see is us increase our investment behind our brands especially our priority brands and businesses as we look at next year. And so, well I made some remarks. When you think about Cereal and what we like. We like what we see in Cereal. Obviously, U.S. Yogurt is improving and we want to keep that trend up. We need to get Snacks back on track. You'll see us invest behind some really good ideas on bars and on snacks, and then our accelerator platforms. So the things that are the biggest priority for us you'll see us improve our brand building not only because they're priority, but because we get good returns and we got some really good marketing on a lot of those businesses. So from a brand building perspective and then the same will be true with Blue Buffalo. And Blue Buffalo we're really encouraged by the trends we see in Food, Drug and Mass and we've got great marketing on Blue Buffalo. So you'll see us invest behind all those businesses as well as capabilities to drive growth. We talked about SRM and we're pleased with what we've done but there's more we can do. And with the e-commerce whether it's on Blue Buffalo or whether it's on our core business we think that there is more we can do and invest in those capabilities.

Yeah. I don't have a lot to add. Jeff touched on where the investment is going to go to drive the top line. And as you alluded to and as Jeff commented in his opening remarks, our focus is maintaining our strong margins and that's what the plan is here to do.

Okay. Super. Thank so much.

Thank you. Our next question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.

Good morning, everybody.

Good morning. Andrew.

I guess with Blue Buffalo entering the base in fiscal 2020 and including the calendar shift it would seem that – maybe that could drive about call it one point of organic growth in fiscal 2020 and I guess that suggests the legacy can be anywhere from flat to up one to hit your targeted organic sales growth range next year. I think organic was flat in fiscal 2019, and you obviously have got another year of significant reinvestment on cap this coming year. So I guess my question is, what would potentially hold back the organic if you will on the legacy portfolio potentially to just flat again? Is it not knowing may be how quickly Snacks and Yogurt responds or any additional sort of competitive concerns out there that are worth mentioning? Or is it really just you know again trying to be prudent and conservative in the way you're thinking about how organic growth sort of build on the legacy? Thanks so much.

Yes. So I mean, two questions -- two responses, Andrew. One is on, how we guide and the second is about kind of what our expectations are on how we guide. I mean, there's a natural tension there, because on the one hand, it occurs to us that doing what you said you're going to do is pretty important. And so we set our guidance accordingly. On the other hand, nobody really likes a sandbagger either in business or in golf. And so we don't -- we're not trying to be too conservative either. We want to set targets we think are going to be realistic that are going to drive value for shareholders, but that we're going to hit. So just is that as a -- that's the way we think about it. In terms of our organic sales growth next year, really Blue Buffalo's going to make a big contribution, but we think the North -- we've got great plans for North America Retail and that we think North America Retail, that's where we can see improvement behind maintaining momentum on Cereal, which we feel good about, improving our Yogurt business and improving U.S. Snacks. And so with those three things improving to the extent that we can hold with growth on Convenience & Foodservice, hold our business in EU, [indiscernible] where it is on growth and continue mid single-digit growth on Asia and Latin America that would -- that tells me that growing Blue Buffalo and improving our top line sales in our two areas we can look forward for growth.

Great. Okay. Thanks for that. And then just a quick one. I realized portfolio mix in North America retail can swing the pricing number around from quarter-to-quarter quite a bit. If we're thinking about fiscal 2020, may be we can talk a bit about just how you see the contribution from volume and price playing out in North America retail?

Let me take it to a company standpoint, and then I'll pass it to Jon for North America Retail. From a company standpoint, I -- first, I will take you back to fiscal 2019. At the very beginning of that year, we said we were going to see about 4% inflation but we needed some pricing and I think it's fair to say, there was some skepticism as well that we could do that or not broadly. And we're pleased that we were able to do that. And we said that the little pricing goes a long way, and it was about 2% versus 1% the year before. I would say that -- and we're not going to give how much pricing we're going to get next year, but what I would say is that we would expect to get a little bit of pricing next year starting in the first quarter. And we'll see a little bit of inflation. So for the company as a whole, we see return, we see some inflation in the coming year as Don indicated and we think that we will get some pricing as well. So, with regard to North America, Jon you might want to comment a little bit on this year and kind of what you expect?

Yes, sure. So Andrew you're right in the fact that there are some fluctuations between quarters for the back half of fiscal 2019, we were -- drove about a point of price/mix and that was the same as for the year as well. So we feel really good about our ability to leverage our SRM toolkit and really drive some pricing in the market. And we have good confidence as we move into fiscal 2020 that we'll continue that through Q1 and really through the fiscal 2020 as well.

Great. Thanks, everyone.

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

Hey, good morning, everyone.

Good morning.

I guess just two quick ones for me, maybe just following on Andrew's question. If we kind of take a little bit of pricing and what you're expecting in terms of HMM savings. Would it be safe to say that the expectation around gross margins are kind of flattish as we're looking at 2020. And then the second question I had was just simply, I don't know if you give it before, but just what you're expecting for CapEx for 2020?

Yes. We didn't give guidance on the latter, but it's certainly about 3.5%, so pretty much in line as a percent of sales of this -- from this year. As far as the construct of the P&L, you'll actually see some gross margin expansion. The key contributors you mentioned about the price -- the positive price/mix that we expect to get that Jeff alluded to. We also obviously have the one-time benefit of rolling over the inventory step up charge that was in F 2019. So we will see gross margin expansion. The investments that Jeff talked about in our brands and in our capabilities will be SG&A investments. So, you'll see SG&A go up as a percent of sales, again as I answered in the earlier question leading to stable operating margins.

And just fair to say for 2020, there's less of a, I guess, need for pricing to sort of drive the gross margin relative to the position that you were in a year ago?

A little less. We noted our HMM and inflation projections for 2019 are a little more in balance than we came in -- from 2020, excuse me, are a little more in balance when we came in for 2019, yes.

Okay. Great. Thank you.

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

Hey, good morning, folks. Thank you for slotting me in. I have a couple of questions on Buff. First, real quick housekeeping. Sorry, may be I'm a little bit tense this morning, but I was having a hard time following the puts-and-takes on your growth expectations for Buff. Could you just give me a number of what you expect that business to grow at in 2020?

Well, yes, the like-for-like basis. 8% to 10%.

And what has it been like for -- like does that exclude just the extra month?

Correct.

Got it. Okay. And on the online component, you guys showed that 21% growth this year, which is obviously quite strong. But it was a pretty big deceleration from the 30% growth in the first half. It kind of suggests that you're probably tracking sort of low double-digits. And I guess my question's, what's driving that? Is that the whole channel has slown? Or has your market share started to drift lower? And regardless to kind of what the driver is if you can give us maybe your thoughts on the explanation of what's causing that?

Yes. So in the fourth quarter our sales in e-commerce were about 14% and the category itself grew less than that. So it really was about 10% or 11%. So we've gained share and gain share commensurate to what we've seen throughout the year, so it was really not a -- it’s not a slowdown in our competitive positioning within the category. If you are agreed about that the channel itself slowed. And I think there are probably a couple of components of that. The first is that there were players in that channel who were trying to take more profit in the category and then their sales slowed. I will also say if you look at Nielsen, you can see that not only the Blue Buffalo pickup in the last quarter of the year, but the FDM channel picked up significantly…

Yes, Yes.

…in the last quarter of the year, behind I would say Blue Buffalo loss. And so that is certainly another component. What I expect going forward, we'll talk about more on Investor Day, I -- pet food is really something that's built for e-commerce and whether that e-commerce takes place with pure players or whether it takes place with our traditional retail customers, I would expect at some point what we're going to see is that the e-commerce channel itself will start to reaccelerate and that will accelerate with it. But it's not -- to answer your question it's not Blue Buffalo getting less competitive. We feel great about our position related to the category itself.

That's really helpful. Thank you. And last quick question. I'll pass it on, I promise. You delivered phenomenal margins on Buff in the fourth quarter. I know there was probably some leverage with a bit of the pipeline sale that may be not want to sustain, but at the same time you've got new capacity coming online next year, you've got a fall away of some of the startup costs. How should we think about the sustainable profitability of that business in context to what we saw in the fourth quarter?

Well, you are right Jason. We had some simply benefits in the fourth quarter from the building that the inventory in the pipeline in the -- as we launched in FDM. That was simply beneficial from a profit standpoint and grew at 27% margin in the fourth quarter. We would expect margin expansion from full year F 2019 going into full year F 2020 and primarily driven by the fact that we are going to have the inventory step up in the numbers. So we expect Blue to be driving very solid margins and certainly be as margin accretive as we expected when we purchased the business a year ago.

Okay. Thanks a lot guys.

Thank you.

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

Hi. Good morning.

Good morning, Chris.

I have -- good morning. I have a couple of follow-ups, if I could please. Just to follow-on Jason's question. We talked about e-com there for Pet. Where are you sourcing the market -- where is FDM if you will sourcing a lot of the market share gain for Blue Buffalo. Is that -- and we saw, of course, that your Pet Specialty sales were down as well. Is that the main area where it's coming from? I guess we also would associate with e-commerce as well given that slope in the second half of the year?

Yes, we're seeing -- thanks for the question Chris. What we are seeing is that the growth in our FDM channel is highly incremental and we -- it looks to us about 70% incremental to everywhere else. And what I would also say is that our household penetration continues to rise and that is the highest predictor of future success as your growth household penetration. And so as we look at the FDM channel what -- our volume is really being sourced from other brands within the FDM channel. And you can see at the FDM channel itself is growing in terms of dollars. And so as we've expanded into FDM channel, one of the things we're most pleased with is that our business is not being sourced from the other members of the wholesome natural segment as much as it is brand in the middle. And so the whole segment is rising the whole natural segment is rising. And that tells us there is a great demand for these kind of products and Blue Buffalo is the market leader and that's kind of what we expected with our launch in FDM and we're really pleased that it's working out that way.

Okay. Yes, thank you for that. And then just one other question I think for Jon Nudi. Just so I have it straight, you have cost inflation broadly offset by HMM in the year, but you also do expect SRM to be a positive contributor. I think you said pricing to be up around 1%. So, that's obviously one question or just one clarification. But related to that I also want to better understand the shift in price mix from Q3 to Q4 just the implication for fiscal 2020. There is a bit of a comp issue in there I think with the prior year, but it is a pretty big move from positive pricing in the mix to negative pricing in the mix in Q4. Sort of to understand the basis of why that changed so much?

Yes, absolutely Chris. So, -- you are absolutely right, we had some fluctuations between quarters. Again, importantly to remember, for the year, we drove a point of price mix into the back half. We drove a point. There were several differences between Q3 and Q4 and the biggest driver of that was trade timing and really the comp to last Year. Last April and May, we had very little merchandising in some of our major businesses. We got back to just normal levels of merchandising this year and that drove some trade expense. So, again, we are very confident in our ability to take pricing and really leverage our SRM toolkit and we expect that to continue as we move into fiscal 2020 as well.

Those trade timing issues should be settled out now, is that right for fiscal 2020?

Yes, that's right. Again, we were just getting back to normalized levels. Our comps last year, again, we didn't have a lot of merchandising particularly in the months of April and May.

Okay. Thanks so much.

Thank you.

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

Great. Thank you and good morning.

Good morning, David.

Hi David.

Wanted to ask a few Blue Buffalo questions. Could you talk about the pacing of sales in 2020? Obviously, in 2019, there was a lot of distribution gains, but I'd just like to hear your thoughts on how this laid out in 2020 in even just the rough form, so we have a good way to track. And I assume that there are additional points of distribution that you still expect to gain like everything else is being dipped in the fourth quarter, so if you could start there?

Yes, David, thanks for the question and I'll take this one. As far as the phasing we're surprised to see the strongest growth in Blue in the middle part of the year Q3 -- Q2 and Q3. Q1 will be hampered a little bit by the fact that we had an extra week in our fiscal 2019 Q1. And obviously in Q4, we left the launch involvement in the expansion of Wilderness. The other factor in Q4 is that we're going to get the benefit of the extra month which as I mentioned in earlier question that all falls in Q4. So, on the like-for-like basis that 8% to 10% we talked about strongest in Q3 -- Q2 and Q3, a little less in Q1 and Q4 for the reasons I've mentioned and then the full benefit of the calendar change in Q4. I hope that helps. To your other point, we do expect to continue to see distribution gains clearly not at the rate we saw this year given the fact that we made the big launch in Walmart, but you'll continue to see us if you leave the latest Nielsen we're already up versus the 65 that we had in the end of April. So, we're in the low 70s already. So, we expect to continue to expand that as F 2020 unfolds.

Thank you. And following on Blue. Can you talk about the growth in wet and treats? One of the benefits that was expected was to see wet and treats grow significantly as you enter into the Food and Mass channels because of the frequency of shopping. Are you seeing the traction there that you wanted to see and what are your expectations in F 2020?

Yes, we are seeing the traction we wanted to see as we launched into the FDM channel. In fact our proportion of wet and treats is higher in FDM than it is in Pet Specialty and that's what we thought we would see as we enter the channel. Again it gives us confidence that we understand the business and how it's going to evolve. What I would tell you is that we also think there's a big opportunity to innovate in the wet and treats area and you won't see that as much -- specially in the first half of F 2020, it'd really be on continued distribution in the growth in wet and treats in the distribution. But we think there's a second act in that and that second act is really around innovation in both of those important segments. I would also say -- it wasn't asked, but as we look at the expansion in the Food, Drug, and Mass, we expanded distribution in America, but we also launched in Wilderness and we're really pleased with both of those expansions. They are right on track and they're growing well and so we see continued growth from those.

Last question from me on Blue. We have this African swine fever that's expected to impact protein prices. Protein I think is the largest piece of the cost of goods for your Blue Buffalo business. Can you talk about how that would be expected to impact? Are you able to hedge? You think you have to take pricing? Just trying to gauge where the level of concern that's on this or if there is almost any concern?

David, yes, we're not concerned about that when it comes to Blue Buffalo. There -- while there is some pressure on protein, it's less on chicken which is the major protein in Blue's portfolio. Now, African swine fever is impacting our pork prices and we are seeing that in our Asian business and our China business, but less so with our Blue business.

Okay guys. Thank you. I'll pass it along.

Thanks.

Thank you. Our next question comes from the line of Alexia Howard with Bernstein. Please proceed with your question.

Good morning, everyone.

Hi, Alexia.

So, can I stick with the pricing and inventory question on North American retail? I'm really just curious about why in measured channels on average across your U.S. portfolio the pricing was fairly flat. Obviously you said that because of comparables your net price mix was down 2%. But I'm just kind of curious about why that pricing being down for you wasn't passed on to the consumer? And then just on the inventory front, it looks as though the flat sales in cereals and yogurt was below the kind of trends of 3.5% sales growth 1.5% sales that we saw in measured channels. Was that to do with pricing dynamics, non-measured channels or maybe retailer inventory reductions? Thank you and I'll pass it on.

Sure Alexia. So, as we look at the quarter, Q4 came in for North American retail very much as we expected. It was actually our strongest quarter of the year from a Nielsen standpoint. So we feel good about the momentum that we're driving in the market. We had about a point half gap between Nielsen movement and what we reported in net sales. And what I pointed out was an inventory drag that we've seen all year as retailers are working on, reducing their working capital and pulling inventories down. There was about a half point related to merchandising timing and again this expense that was in Q4 as we got back to normalized levels of merchandising. So that was really the one thing in Q4 that really affected both price mix as well as our reported net sales. Again, as we look at our momentum in the market, we look at our share position, we feel really good about the momentum that we have as we move into the coming year and feel good about our plans as well.

Alexia, this is Jeff Siemon. I'd just add that, if you look at the full year, North American retail Nielsen's versus shipments was directly in line with what we said at the beginning of the year which is we'd lag by about one point and that's what we saw for the full year.

Do you expect those retailer inventory reductions to continue if they've been fairly consistent through the course of fiscal 2019?

We do. I mean again, we definitely see our retail partners focus on working capital and we think they'll continue to make -- take and put initials in place to reduce inventories over time. We'll be at the same -- to the same extent as this year. I don't know, but we expect it to continue.

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

Thank you. Our next question comes from the line of Ken Zaslow with Bank of Montreal. Please proceed with your question.

Hi. Good morning, everyone.

Good morning, Ken.

I just have a big overall question. Your long-term growth algorithm is mid-single-digit operating profit. You had a year that you kind of consolidated and figured out a lot of the issues you moved past so many things and then in 2020, you're still looking for 2% to 4% operating profit growth. What do you -- can you kind of – compare and contrast why there is a difference between your long-term and when you will return to that and why not in 2020?

Yes, I think the way I look Ken -- this is Jeff. The way I look at it is that we keep making improvements towards our long-term algorithm and I think we took a step this year when we acquired Blue Buffalo and we'll take another step forward in fiscal 2020. And I think the most important part of getting to mid-single-digit operating profit really is to drive organic sales. And between Blue Buffalo and what we expect with NAR next year, we think we'll take another step forward with driving our organic sales to 1% to 2% which is higher than we've done in the past few years. And we're disciplined as we look at cost of doing it. And then we'll look to take another step the following year and so for me the steady progression is the key and it really starts actually with organic sales.

So you -- I know this is way out there and you just gave 2020, but you would expect though outside any exogenous factors that 2021 will be at least back into that range. I know that that's a little far out, but I'm just trying to figure out like when the long-term growth rate we could start to assume that that is a viable place to start. Is that a fair way of looking at it? I'm not trying to box you in. I'm just trying to think about it.

Hey Ken, this is Don. We just gave two fiscal 2020 guidance, so we're going to hold off on talking anything beyond fiscal 2020 at this…

Okay, great. I appreciate it. Thank you.

Thank you. Our next question comes from the line of Robert Moskow with Credit Suisse. Please proceed with your question.

Hi, thanks. Most of my questions have been asked. But I guess I'll ask a follow-up to Ken Zaslow's question. I mean, you have now operating margins in the low 20% range for Blue, North American Retail and Convenience Stores and Foodservice. It just feels like these margins don't have much room to go higher and you have reinvestment needs that seem to be kind of ongoing. Retailers have invested a lot in data analytics and it seems like there is a data war that you will need to keep putting money into. Maybe give me an update in the data war may be. Are you getting closer to investing in SRM at the appropriate level? And then just bigger picture, is it possible that if sales growth stays in the low single-digit range maybe it just is going to be a lot harder from an algorithm standpoint to see mid-single-digit operating profit growth. Thanks.

Rob, I'll start with the larger picture and comments and I'll let Jeff go into little bit more about how we are thinking about that. But in terms of the margins just bringing up Jeff's answer to Ken's question is, it really is going to be triggered off, continue to accelerate our organic growth. Your comments on NAR, CNF and Blue Buffalo strong margin is well taken. It’s not those businesses don't have opportunity, but they are already very healthy and frankly driving growth in those businesses as a topline growth is very attractive for position even at the current strong margins. As we look longer though, we do know we have opportunity internationally and as we think about margin expansion beyond fiscal 2020, we need the internationals where the percentage margin benefit can come from. As far as the data analytics or investments, we will continue to invest in our brands and in our capabilities. We're targeting now, continue to build out what we are doing with e-commerce and SRM by getting deeper into the data analytics with something that has served us well and we will continue to invest and actually we think it's a key driver of our ability to drive that and accelerate that topline growth.

Yes I'll build on what Don said. I mean it's interesting you characterize the data as a war and I'm not really sure I view it that same way. I mean, I think that our ability to use data to drive our Consumer First strategy is actually a potential for high competitive advantage because it requires a scale. And we have proprietary data through our three big websites. We think we'll have proprietary data through Box Tops for Education; we'll talk about -- a little bit about that in the coming weeks. And data analytics is something where scale matters and not only for the retailer, but for us. And we think that the fact that some of our retailers are getting more sophisticated with data actually helps us because we think that we'll be able to utilize that better than some of the other players especially some of the smaller players in the market. And so, I understand that it makes people nervous when we start talking about data and when our retailer starts talking about that, but I don't view it as a war. Actually I think it's a net opportunity for us.

Okay. Maybe you are winning the war Jeff. Thanks a lot, got it.

Okay. I think we've hit the bottom of the hour. So I know we didn't get acquainted to everyone, but we appreciate the time that you all spent this morning. We are around all day for follow-up questions for those of you that we didn't get to. Thanks again for the interest in General Mills and hope everyone has a wonderful day. Thanks Tanya.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.